Forex - Yen, Aussie weaker as busy data day kicks off upbeat

Investing.com - The Aussie and yen held slightly weaker in early Asia on Monday ahead of a slew of data that will underpin policy expectations for the next month.

AUD/USD fell 0.05% to 0.7644, while USD/JPY rose 0.03% to 124.20, after early data sets.

The Australia AI Group manufacturing index rose 4.3 points to 52.3, the highest since October 2013.

Manufacturing is getting a boost mainly from food and beverages which are supported by local demand and exports as a result of a lower exchange rate.

"The flow of benefits for domestic producers from the lower Australian dollar is picking up as exports recover some of the ground lost in recent years," said AI Group Chief Executive Innes Willox.

"This was a clear positive for performance in May together with strong residential construction activity and very low interest rates and helped propel the sector into expansionary territory for the first time in six months. There remains a fine balance, however, and the rapid decline in mining construction, the progressive closure of automotive assembly and subdued local business investment in machinery and equipment continues to weigh on local demand."

In Japan, capital spending for non-financial firms jumped 7.3% year-on-year in the first quarter, compared to an expected drop of 0.1%. Later Japan reports manufacturing for May with a steady 50.9 level seen.

Up ahead in Australia comes the Melbourne Institute inflation gauge for May month-on-month, building approvals with a 2.0% decline seen, business inventories for the first quarter seen up 0.1% and company profits for the first quarter, seen up 0.5% quarter-on-quarter.

Then in China, the HSBC Manufacturing PMI for May comes out with 49.2 seen, a slight tick up from 49.1 in April.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted up 0.20% to 97.14.

Last week, the dollar slipped lower against the euro on Friday after data showed that the U.S. economy contracted in the first quarter, but recent indications of a rebound in growth continued to support expectations for higher interest rates.

The Commerce Department said U.S. gross domestic product contracted ant an annual rate of 0.7% in the first three months of the year, instead of the initial estimate of 0.2% growth. However, it was still better than economists’ forecast of a 1% contraction.

The single currency remained under pressure as Athens continued long-running negotiations with its lenders on a cash-for-reforms deal ahead of a €305 million payment to the International Monetary Fund due on June 5.

The dollar strengthened broadly in May as stronger U.S. economic data prompted investors to bring forward expectations on the timing of an initial rate hike by the Federal Reserve.

Upbeat reports on inflation, new home sales, business investment and consumer confidence during the month all indicated that the economy is gaining momentum after a weak first quarter.

In the week ahead, Friday’s U.S. employment report will be closely watched for signs of improvement in the labor market. Central bank meeting in the euro zone, U.K. and Australia will also be in focus.

Also on Monday, Germany is to release preliminary data on consumer prices. The euro zone is to release final data on manufacturing sector growth.

Later in the day, the Institute of Supply Management is to release data on U.S. manufacturing activity.