The U.S. dollar rose to a new one-month high against six major trade-weighted currencies on Tuesday. The gain came on the back of positive economic data that showed that the U.S. manufacturing activity in Februarystrengthened beyond expectation. The USD gained 0.25% to reach a high of 98.52 against the six major trade currencies.
Positive economic data drive optimism
The Institute for Supply Management (ISM) reported that its purchasing manager index (PMI) rose to 49.5 in February from 48.2 in the previous month. The growth was stronger than what analysts anticipated for the month. Analysts were looking for PMI reading of 48.5 in February. The upbeat U.S. economic data supported the dollar gain against the other major global currencies. USD gained 0.98% the Japanese yen to 113.78.
Yen gains on tepid Chinese economic data
However, the yen had risen earlier thanks to negative Chinese economic data. The Chinese manufacturing sector continued its slowdown in February, logging the seventh month in a row of contraction in the country’s manufacturing industry. The official Chinese manufacturing PMI was down to 49.0 in February compared to a reading of 49.4 in January. Analysts had expected just a small decline to 49.3.
Still in China, private sector manufacturing index also shows continued economic weakness. The Caixin manufacturing PMI fell to 48.0 in February compared to 48.4 in the previous month. Economists had expected the index to be 48.3.
Positive employment numbers fail to help Euro
Unemployed rate in the Eurozone was shown to have contracted faster than expected. The 10.3% unemployment rate in January was the lowest on record since August 2011. Economists were predicting Eurozone unemployment rate for January to 10.4%, the same level as December 2015.
However, despite the positive Eurozone job data, Euro still faltered against the dollar, declining 0.27% to 1.0846. Reports indicating that Eurozone was sliding back to deflation dimmed the benefits for the positive employment metrics. It is expected that the European Central Bank could roll out more quantitative easing plans at the March 10 meeting.