Resilient Chinese data aids risk-oriented currencies
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar lost ground against most major rivals Tuesday, with the euro finding support as purchasing- managers-index readings showed private-sector activity didn’t slow as feared this month.
The dollar index DXY -0.75% , which tracks the U.S. currency against a basket of six major rivals, traded at 73.642, down from 74.063 in North American trade late Monday.
The euro EURUSD +0.86% rose to $1.4478 from $1.4379 in late action Monday.
The Markit composite euro-zone purchasing-managers index was unchanged at 51.1. Economists had forecast a decline to 50.3. A reading of more than 50 indicates growth in activity, while a figure of less than 50 signals contraction.
Manufacturing activity did shrink, the data showed, with the PMI for the sector falling to 49.7 from 50.4 in July. Economists had forecast a reading of 49.5. The services PMI slipped to 51.5 from 51.6 in July, holding above forecasts for a reading of 50.7. Read Market Pulse on euro-zone PMI.
“The fact that the euro-zone composite PMI was unchanged in August comes as a slight relief after recent bad news, but the index is still dangerously close to recession territory,” said Jennifer McKeown, senior European economist at Capital Economics in London.
Still, the figures provided a sigh of relief that fueled gains by the euro, which may target the $1.45 level versus the dollar later in the day if investors’ risk appetite can be sustained, said Boris Schlossberg, director of currency research at GFT.
But resistance above $1.45 is likely, “especially if U.S. equities fail to extend the rally,” he said.
U.S. stock-index futures were higher, pointing to a rise by Wall Street, after equities managed to rebound Monday from last week’s global rout.
Currencies that tend to rally as risk appetite rises were boosted early Tuesday after a purchasing-managers index for China unexpectedly rose to a two-month high of 49.8 in August, but remained marginally in contraction territory. Read Market Pulse on HSBC’s China PMI data.
The Australian dollar AUDUSD +0.85% was up 1% versus its U.S. counterpart to change hands at $1.0494, while the New Zealand dollar NZDUSD +0.90% rose 1.1% versus the U.S. unit to buy 83.14 U.S. cents.
The greenback slid 0.5% versus the Canadian dollar USDCAD -0.34% to buy 98.58 Canadian cents.
Strategists at RBC Capital Markets said the China PMI data sparked a short-covering rally that helped lift risk-oriented commodity currencies as well as the euro.
The British pound GBPUSD +0.61% , meanwhile, rose to $1.6551 versus the dollar, from $1.6480.
The broadly weaker U.S. dollar lost ground to the Japanese yen USDJPY -0.31% , changing hands at ¥76.6, down from ¥76.75 late Monday despite reiterated intervention threats by Japanese officials.
Japanese Finance Minister Yoshihiko Noda told parliament on Tuesday that the government would continue to watch for speculative moves in the currency market and would step in if needed to sell the yen if the currency makes surges up.
“Whenever intervening in the market, we always implement it with strong resolve,” Noda said, according to Dow Jones Newswires.
