News Maker 23

The Australian dollar traded within a relatively narrow range against the US dollar during Asian trading on Monday, August 31, 2026, as markets digested the latest economic activity data from China. The AUD/USD pair hovered around 0.7160 after opening with a bearish gap. Given the close trade ties between Australia and China, economic developments in China serve as a key factor influencing the Australian dollar's movements.

China's official manufacturing PMI rose to 49.8 in August from 49.2 in July, slightly exceeding the forecast of 49.7. However, the figure remained below the 50 mark, signaling continued contraction in manufacturing activity. Meanwhile, the non-manufacturing PMI held steady at 49.0, indicating that the services and construction sectors also failed to record expansion.

Domestically, Australia's TD-MI Inflation Gauge rose to 4.8% year-on-year in August, up from 4% previously. However, the month-on-month increase slowed to 0.5% from 1%. Persistent inflation data reinforces expectations that the Reserve Bank of Australia has limited room to aggressively loosen monetary policy.

Upside potential for the AUD/USD remains capped by a strong US dollar, bolstered by Federal Reserve Chair Kevin Warsh's hawkish remarks at Jackson Hole. Markets are pricing in a roughly 57% probability of a Fed rate hike in September, while US Treasury yields remain elevated. These conditions sustain the dollar's appeal and limit rallies in risk currencies like the Australian dollar.

According to Newsmaker, the Australian dollar's current movement reflects a tug-of-war between a moderate improvement in Chinese manufacturing data and pressure from the Fed's hawkish policy stance. Until China's economy demonstrates stronger expansion and the US dollar remains supported by rate-hike expectations, the AUD/USD is likely to trade within a limited range. Attention will now shift to upcoming US labor and inflation data, which could determine the dollar's trajectory in the sessions ahead. (CP)