Dollar falters after manufacturing failure as traders turn to payroll
Data showed shortages of basic materials and transportation depressed the Institute for Supply Management’s manufacturing survey by 4.7 points to 64.7, tipping the dollar from a three-week high on the yen and a two-week high on the euro.
As trade in Asia was weakened by the holidays in Japan and China, other moves were muted, leaving the dollar to rebound slightly from overnight levels to stand at 109.14 yen and 1.2054 $ per euro.
The common currency rose 0.3% overnight and found further support thanks to a surge in German retail sales and record industrial activity in the Eurozone.
The Australian and New Zealand dollars edged down on Tuesday after rebounding overnight, while the US dollar index against a basket of key rivals nailed 0.05% to 91.036.
Traders are now focusing on the expected services figures on Wednesday and the payroll data on Friday and the markets appear finely balanced. Some analysts believe strong numbers could boost the dollar by pushing forward expectations for higher interest rates, while others argue that a strong U.S. economy would weigh on the currency as imports rise and the deficit increases. commercial increase.
“The ISM manufacturing report has not lived up to expectations, but the payroll is expected to be at least as strong as consensus expectations,” Westpac analysts said in a note.
“The influential and accommodating core of the Fed won’t do it, but expectations for strong US data this week and possibly a more hawkish regional Fedspeak leave the dollar index positioned for more two-way price action.”
Benchmark ten-year US Treasury yields fell 2.5 basis points on Monday in the wake of the ISM failure and as New York Fed Chairman John Williams reiterated that the recovery so far is “not enough” to cause a tightening of monetary policy.
Central bank meetings in Britain and Norway are also on the horizon, along with the results of the Reserve Bank of Australia’s policy at 4.30am GMT.
No changes are expected from the RBA, although the tone of the statement may give clues as to whether the bank will improve on the economic forecast it is due to release on Friday.
The Australian dollar was 0.1% weaker in morning trade at $ 0.7756, and the kiwi a little softer at $ 0.7194.
The British pound was perched near a weekly high on the euro and had crossed its 20-day moving average against the dollar overnight to sit at $ 1.3905 as traders believe the Bank of England could announce a slowdown in its bond purchases at its meeting on Thursday.
Elsewhere, the cryptocurrency ether extended its all-time high, hitting a new all-time high of $ 3,457.64 before pulling out a fraction.