A shock improvement in Chinese factory activity supported the yuan and Australian dollar on Monday, and provided a wider lift to investors’ risk appetite, giving the dollar a lift versus the safe-haven yen.
Factory activity in China surprisingly grew for the first time in four months in March, an official survey showed on Sunday an indication government stimulus might be beginning to take hold in the world’s second biggest economy.
The official Purchasing Managers’ Index (PMI) increased to 50.5 in March from February’s three-year low of 49.2, beating economists’ median prediction of 49.5.
Investor confidence received an additional boost on Monday after a private business survey showed China’s industrial sector suddenly returned to growth in March.
The positive analyses pushed the Australian dollar, frequently seen as an investment proxy for Chinese monetary forecasts, 0.4 percent higher to $0.7126.
The Chinese yuan also gained a quarter of a percent in offshore trade to 6.707 to the dollar.
The dollar increased 0.3 percent to 111.12 yen, spreading its advance from the 1-1/2-month low of 109.70 it touched last week to 1.3 percent.
"It seems like policy support is working to underpin the Chinese economy," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
"But while policy steps will likely stem a further slowdown, they are unlikely to accelerate the economy. If markets got carried away with pricing in too much optimism, we could see some set-back down the road," she said.
However, Japanese March factory yield tumbling at the fastest rate in three years.
The output curve between three-month U.S. Treasury bills and 10-year notes become positive again on Friday, after being upturned for a week – an emblematic change that seemed to help lift market participants’ confidence.
The euro struggled close to three-week low of $1.1210 brushed on Friday. The single currency was last trading up 0.1 percent at $1.1232.
Sterling was a shade lower at $1.3032, imminent of Friday’s near-three-week lows of $1.2977 and not different from last month’s low of $1.2945.
Britain’s exit from the European Union was on confusion after the conquest of Prime Minister Theresa May’s proposed Brexit deal left her under pressure from opponent factions to leave with no a deal, go for an election or forge a much softer separation.
Traders also say investors have scaled back trading of the pound because it has become so hard to forecast in the midst of the constant and sometimes arcane political growths.
"Monday will be another interesting day in parliament," said Seema Shah, senior global investment strategist at Principal Global Investors in London.
"If MPs are able to form a majority around a few of the motions - most likely the permanent customs union motion or a 'people's vote' on the agreed deal, we could see sterling re-strengthen on revived hopes of a soft Brexit."
The Mexican peso increased 0.35 percent to 19.364 to the dollar while the South African rand add on about 0.8 percent to 14.395 per dollar.
The Turkish lira eased above 1 percent to 5.6158 for every dollar after President Tayyip Erdogan's reigning AK Party lost control of the capital Ankara for the first time in a local election and he seemed to accept defeat in the country's biggest city, Istanbul.