Forex - AUD/USD drops to 4-day low as risk aversion mounts

Forex Pros – The Australian dollar dropped to a four-day low against its U.S. counterpart on Monday, as risk aversion mounted amid concerns over euro zone debt issues and following a report showing that Chinese manufacturing growth slowed this month.

AUD/USD hit 1.0539 during late Asian trade, the pair’s lowest since May 17; the pair subsequently consolidated at 1.0550, tumbling 1.04%.

The pair was likely to find short-term support at 1.0504, the low of May 17 and resistance at 1.0680, the high of May 19.

On Friday, Fitch Ratings downgraded Greek sovereign debt ratings by three notches, saying a “soft” restructuring of the country’s debt by European Union policy makers would be considered a default.

Earlier Monday, a preliminary reading of the Markit/HSBC Chinese manufacturing purchasing managers index was 51.1 for May compared with a final reading of 51.8 in April.

A number above 50 indicates expansion in the sector. HSBC said the reading was the lowest in 10 months. China is Australia’s largest trading partner.

The Aussie was also sharply lower against the yen, with AUD/JPY falling 0.83% to hit 86.36.

On Sunday, Australia’s Treasurer, Wayne Swan said the new managing director of the International Monetary Fund should be picked on “merit” and that the convention of selecting only Europeans for the post was outdated.

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