Japanese yen climbs, while British pound slumps after downbeat data NEW YORK (MarketWatch) -- The U.S. dollar rose against other major currencies Monday, but fell against the Japanese yen and the Swiss franc, as investors hunted for safety amid downbeat economic data throughout the world. The dollar index , which tracks the performance of the dollar against other major currencies, was up 0.3% to 86.99. The dollar fell 1.7% to 93.97 yen, while the euro fell 0.5% to $1.2633. The yen frequently rises when risk appetite falls, as traders buy back low-yielding currencies and pare their bets against higher-yielding ones. The Swiss franc, another low-yielding currency, also rose Monday. The moves came after manufacturing gauges in the United States, China, the euro zone and Britain showed significant drops, with the Chinese and British gauge dropping to record lows. In the U.S., manufacturing activity declined at the fastest pace in 27 years in November, the Institute for Supply Management reported Monday. The ISM index fell to 36.2% in November from 38.9% in October. It's the lowest reading since early 1982. Economists were expecting the ISM index to fall to 37%. Readings under 50% indicate most firms reported worsening conditions. See Economic Report. Federal Reserve Chairman Ben Bernanke is speaking on the economic outlook at a Dallas Fed conference Monday, and Treasury Secretary Henry Paulson is due to give an update on the U.S. economy and markets. "At the start of December, the relationship between the low-yielding yen, Swiss franc and U.S. dollar has tightened again due to economic weakness," said currency strategists at Brown Brothers Harriman. "Today's dreadful economic data from China to Germany, the U.K. and Sweden and evidence of a further deterioration in U.S. data today, are helping to fuel talk of more aggressive policy action ahead of this week's central bank meetings," they said in a research note. The European Central Bank and the Bank of England are expected to cut interest rates further at their policy meetings Thursday. Economic weakness China's currency staged a record loss against the U.S. dollar Monday, falling to the lower end of its daily trading limit, in what some analysts said is a policy shift as authorities let the yuan depreciate against the greenback in an effort to help bolster the decelerating economy. A gauge of China's manufacturing activity in November, as compiled by brokerage CLSA Asia-Pacific Markets, marked the sharpest drop in the history of the survey, which began in 2004. The Purchasing Managers Index fell to 40.9 in November, from 45.2 in the preceding month, its fourth straight monthly decline. Unlike the U.S. and European data, a Chinese PMI below 50 doesn't indicate economic contraction, though it does indicate slowing growth in the key emerging-markets economy. "With the U.S., Europe and Japan being in recession, Chinese production is being hurt by diminishing export demand," said analysts at Sarasin. The U.K. and euro-area PMI also hit record lows, with the euro-area PMI falling to 35.6 in November from 41.1 in October and the U.K. PMI falling to 34.4 from 40.7 in October. Sterling dropped 3.1% to $1.4905, and the euro rose 2.8% to 85 pence. Sterling also dropped as European Union President Jose Manuel Barroso said in a French radio station interview that U.K. officials "who matter" were considering joining the euro. Barroso said that while a majority in the U.K. are opposed to the idea, "people who count in the United Kingdom are in the process of thinking about it." "While the Barroso comment might dampen near-term sterling volatility against the euro, we see the U.K. not getting into [euro zone] any time soon," said strategists at BNP Paribas. For another angle on currencies, read everything one needs to know about cashing in a coin collection.

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