Market Review – 01/02/2011 20:20 GMT
The dollar falls as upbeat global manufacturing ISM data boosts risk appetite
The greenback declined against most of its counterparts on Tuesday as the solid global manufacturing ISM data together with rallies in global stock markets bolstered risk appetite, dampening the demand for dollar as a safe-haven asset. Easing fears on Egypt’s geopolitical concerns also helped support the higher-yielding currencies. The dollar index, which tracks the greenback against a basket of currencies, fell as low as 77.092, its weakest since early November.
The U.S. manufacturing ISM index unexpectedly increased to 60.8 in January, the fastest pace in nearly seven years in January fm 58.5 in the previous month.
Despite Monday’s retreat fm 1.3740 to 1.3664, the euro ratcheted higher to 1.3776 in European morning on Tuesday n price later rallied after the release of U.S. ISM manufacturing data n price later climbed to as high as 1.3843 ahead of NY closing. The euro was also supported by strong economic data fm Germany n eurozone. German unemployment fell to an 18-year low at 7.4% in January, unemployment change showed the number of people out of work dropped to a seasonally adjusted 13k to 3.135 mln, the lowest lvl since November 1992. Both German n eurozone manufacturing PMI in Jan were better-than-expected at 60.5 n 57.3 respectively.
Despite the retreat from Asian high of 1.6080, the British pound then jumped from 1.6035/37 to 1.6143 after the release of much stronger-than-expected U.K. Jan manufacturing PMI, the index came in at 62.0, the highest since survey began in 1992 compared to the previous reading of 58.3 n street forecast of 57.9. Cable later rose further in NY mid-day to an intra-day high of 1.6164 near NY closing.
Versus the Japanese yen, the dollar remained under pressure in Asian n European sessions n despite a brief but sharp bounce to 81.91 after the release of U.S. manufacturing PMI, the pair then tumbled to as low as 81.31 on dlr’s broad-based weakness in NY afternoon b4 trading sideways.
Swiss National Bank vice-chairman Thomas Jordan said that Switzerland is well positioned to deal with challenges such as the strong Swiss franc, which is a big burden for the country’s exporters. Although the dlr/chf pair bounced briefly but strongly to 0.9457 on reaction to the stronger-than-expected U.S. ISM manufacturing PMI data, dollar later pierced through Monday’s 0.9369 low easily n dropped to an intra-day low 0.9337 b4 recovering in NY afternoon.
The Australian dollar, New Zealand dollar n Canadian dollar also strengthened against the dollar on Tuesday, aud/usd rallied fm 0.9963 to 1.0149, nzd/usd rose strongly fm 0.7712 to 0.7824, n usd/cad tumbled fm 1.0010 to 0.9900.
Data to be released on Wednesday:
U.K. BRC shop price index and PMI construction, eurozone PPI data, and U.S. ADP employment on Wednesday.