The U.S. dollar weakened against the majority of its rivals after reports showed manufacturing from China to Europe exceeded forecasts, reducing demand for safer assets. A preliminary gauge of Chinese manufacturing in August was 49.8 according to a reading of the Purchasing Managers’ Index today. The print bettered the “rumored” number of 45 and provided relief to Asian stock markets. European stocks and American futures also ticked higher, weighing on the greenback. The U.S. dollar may remain under pressure over the next few days as speculation rises the Federal Reserve will announce this week further monetary stimulus to bolster the U.S. economy. However, if Fed President Ben Bernanke does not signal further bond purchase, the greenback could see modest strength at the end of the week. Later this morning, new home sales on a month over month basis are expected to fall 0.6% in July after falling 1.0% in the month prior.
The Euro strengthened for a third straight day against the U.S. dollar after gauges of German and Euro-area manufacturing beat estimates. Germany’s manufacturing purchasing managers’ index was 52 in August, exceeding forecasts of 50.6 in a Bloomberg survey. A composite index of euro-area purchasing managers in services and manufacturing also modestly exceeded expectations. The strong data sent European stocks over 1.0% higher and boosted demand for other higher-yielding assets such as the Euro. However, gains in the euro were tempered after an industry report showed German investor confidence slumped in August. The ZEW Center for European Economic Research said its index of investor and analyst expectations fell to minus 37.6 from 15.1 in July.
The Japanese yen pushed higher against the U.S. dollar but fell against its other counterparts as strong global economic data and rallying stock indexes weighed on the safe-haven currency. Once again Finance Minister Noda said recent gains in the yen may hurt the nation’s economy, further fueling speculation officials will act to curb its appreciation. Prime Minister Naoto Kan told his cabinet today that he will resign after the passage of legislation including a deficit-covering bond bill, Kyodo News reported. Kan said a new prime minister will probably be decided on August 30th.
The British pound climbed versus the U.S. dollar as positive economic data and higher stocks increased demand for the Sterling. The number of July mortgages granted to British homebuyers to purchase property climbed 33,417 from 31,747 in June, the British Bankers’ Association said today. Also, a U.K. index of factory orders rose from a three month low in August and consumer-goods manufacturers predict a “strong rise” in output in the next quarter, the Confederation of British Industry said today. Britain’s benchmark stock index, the FTSE 100, jumped 1.3%, extending yesterday’s 1.1% advance.
