Forex - Australian dollar up in early Asia trade ahead of HSBC China PMI

Investing.com - The Australian dollar gained smartly in Asia on Monday ahead of the China HSBC Flash Purchasing Managers Index for March expected to set the tone for the Aussie with the country heavily dependent on trade with China, particularly resources such as iron ore.

The HSBC data is due at 0945 local time (0145 GMT) with a forecast of 48.7 expected, compared to 48.5 for the previous month. A figure below 50 implies contraction.

AUD/USD traded at 0.9102, up 0.22%, in early trade, while USD/JPY changed hands at 102.22, down 0.03%, following a public holiday in Japan on Friday.

The U.S. US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, traded flat at 80.28.

Last week, the U.S. dollar fell against the Canadian dollar as the release of stronger-than-expected Canadian inflation data eased pressure on the Bank of Canada to cut interest rates.

USD/CAD slid 0.18% last week to settle at 1.1220, backing off the four-and-a-half year peaks of 1.1277 reached on Thursday.

The Canadian dollar found support after Statistics Canada reported that consumer prices rose 0.8% in February, up from 0.3% in January. Analysts had forecast a 0.6% rise.

On a year-over-year basis, inflation slowed to 1.1%, from 1.5% in January.

The loonie, as the Canadian dollar is also known, received an additional boost after a separate report showed that Canadian retail sales rose 1.3% in January, recouping some of the previous months 1.9% decline. Market expectations had been for an increase of 0.8%.

The dollar rose to its highest level against the loonie since July 2009 on Thursday, buoyed up by expectations that the Federal Reserve could hike interest rates earlier than previously thought.

The dollar strengthened across the board Wednesday after Fed Chairwoamn Janet Yellen indicated that the bank could begin to raise interest rates about six months after its bond-buying program winds up, which is expected to happen this fall.

The comments prompted investors to bring forward expectations for a rate hike to as soon as March of next year.

The Fed also reduced its monthly bond purchases by an additional $10 billion to $55 billion at the conclusion of its two-day policy meeting, and said there was “underlying strength in the broader economy.”

In the coming week, investors will be looking ahead to U.S. data from the housing sector, as well as reports on consumer confidence and durable goods. Canada is not scheduled to release any economic reports.

On Monday, the U.S. is to release preliminary data on manufacturing activity.