The U.S. dollar opened the year lower versus the majority of its rivals as global risk appetite increased on the back of strong manufacturing data in China and India. China’s purchasing managers’ index for manufacturing increased to 50.3 last month from 49 in November. At the same time, India’s PMI for manufacturing rose to the highest in six months, HSBC Holdings Plc reported yesterday. The data has caused global stocks to rally, boosting higher-yielding currencies such as the Australian and New Zealand dollars. Later this morning, the U.S. Institute of Supply Management is expected to report its factory index rose to 53.4 in December from 52.7 in the previous month. Tomorrow a separate report is expected to show bookings for factory goods climbed 2.0% in November after a 0.4% drop in the previous month. Weekly jobless claims and the ISM non-manufacturing composite will be released Thursday morning, followed by Non-farm payrolls and the unemployment rate on Friday.
The Euro gained to its strongest level in a week against the U.S. dollar as strong global data increased demand for the common currency. The euro extended gains after the Nuremberg-based Federal Labor Agency said German unemployment fell in December more than economists forecast. Traders will now shift their focus to European services and manufacturing data expected to be released tomorrow that will show output shrank for the fourth month in December. Despite the small rally in the Euro, the common currency was the worst performing currency in 2011 according to the Bloomberg Correlation-Weighted Indexes, which tracks 10-developed-nation currencies. The euro slid 2.0%, while the U.S. dollar gained 1.1%.
The Japanese yen strengthened against the U.S. dollar, but remained in familiar ranges from the past two months. Japan refrained from selling yen in the foreign-exchange market this month, the Ministry of Finance said on its website today. In the month through November 28th, Japan sold 9.09 trillion yen, the biggest intervention on a monthly basis in data going back to 1991.
The British pound also rallied against the U.S. dollar as the U.K. economic docket joined other nations in reporting strong manufacturing data, boosting the domestic currency. U.K. manufacturing shrank less than economists forecast in December as demand increased in Germany and China. A gauge of factory output based on a survey by Markit Economics rose to 49.6 from a revised 47.7 in November. The median forecast was for a drop to 47.3. Nevertheless, a reading below 50 indicates contraction. The reading offers a glimmer of hope for the manufacturing industry in the U.K. The sovereign debt turmoil in Europe, the U.K.’s biggest export market, had dimmed the outlook for manufacturers.
