MW:Dollar regains ground; pound bounces on U.K. PMI
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar edged higher versus most major rivals on Monday, reclaiming some ground lost at the end of last week after Federal Reserve Chairman Ben Bernanke hinted at another round of monetary stimulus but offered no details on the timing of any measures.
The British pound stole the spotlight, however, erasing an early loss versus the dollar after a purchasing managers’ index for the U.K. manufacturing sector unexpectedly rebounded, indicating a significant easing of the sector’s downturn.
Overall trading activity is expected to remain light, with U.S. markets closed for the Labor Day holiday.
The ICE dollar index DXY +0.03% , which measures the U.S. unit against a basket of six major rivals, rose to 81.31 from 81.242 in North American trade late Friday.
“The possibility of additional stimulus being announced at the next [Fed policy] meeting is finely balanced, and there is increased market focus on Friday’s nonfarm payrolls; there is also [Institute for Supply Management] numbers out tomorrow,” wrote strategists at Lloyds Bank in London. “With the U.S. on holiday today, the dollar index looks likely to remain range-bound but will likely maintain a downside bias,”
The WSJ dollar index XX:BUXX +0.07% , which tracks the currency against a slightly larger basket, rose to 70.9 from 70.81 on Friday.
The British pound GBPUSD +0.08% was virtually unchanged at $1.588 after dipping as low as $1.5806 in early action. The euro EURGBP -0.08% fell 0.2% versus sterling to change hands at 79.13 pence.
The August Markit/CIPS purchasing managers’ index, or PMI, for the U.K. manufacturing sector rebounded to 49.5 from 45.2 the previous month. A reading of less than 50 still signals that activity in the sector contracted, but economists had forecast a more modest rebound to 45.9. Read: U.K. manufacturing PMI rebounds in August .
The euro EURUSD +0.01% changed hands at $1.2564, down from $1.2575 on Friday.
The final euro-zone manufacturing PMI reading for August came in slightly below a preliminary estimate, confirming that the downturn in the sector continued in August. See: Euro-zone manufacturing shrinks more in August .
The meeting Thursday of European Central Bank policy makers is shaping up as the most eagerly anticipated event of the week, with investors looking for ECB President Mario Draghi to provide more details on the bank’s bond-buying plan.
“Draghi might be in favor of providing support for the peripheral economies; the question is whether he has managed to convince the rest of the ECB board,” wrote economists at Investec in London.
They noted a report in a German newspaper on Friday that German Bundesbank President Jens Weidmann had considered resigning amid his opposition to renewed bond-buying by the ECB.
The dollar rose marginally versus the Japanese yen USDJPY -0.02% to ÂĄ78.38 from ÂĄ78.34 on Friday.
The Australian dollar AUDUSD -0.36% bought $1.0244 versus its U.S. counterpart, down from $1.0323.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
