The Australian dollar crept up after stronger than expected Chinese manufacturing figures.
The HSBC flash PMI survey, which favours smaller, privately-owned firms, recorded an overall result of 49.7 for May. This was an improvement on April’s 48.1.
The results were still indicative of a contracting sector. Any result above 50 indicates growth, and below it decline.
HSBC’s chief China economist Hongbin Qu said the recovery was broad-based, and noted that in the report that, “Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs.
"But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months."
The Australian dollar strengthened to $US0.926 from $US0.9225 shortly after the news.
FXCM analyst David de Ferranti pointed out that China’s factories were in contraction.
“On balance Chinese data remains relatively soft, and a deterioration would bode ill for its major trading partners including Australia, which in turn may weigh on the Aussie,”he said.