MW: Dollar tumbles after downbeat China manufacturing data
The U.S. dollar fell across the board on Friday, after weaker-than expected Chinese manufacturing data drove concerns about the global economy, pushing investors toward the perceived safety of the Japanese yen.
The dollar USDJPY, -0.67% slid to ÂĄ122.89 versus ÂĄ123.44 seen in late North American trade on Thursday. The euro EURUSD, +0.4270% rose to $1.1276 against the dollar, compared with $1.1215 on Thursday, which was a one-week high.
The ICE U.S. dollar index DXY, -0.31% a measure of the dollar’s strength against a basket of six currencies, fell 0.5% to 95.513.
Earlier on Friday, the preliminary Caixin China Manufacturing Purchasing Managers’ Index, a gauge of nationwide manufacturing activity, dropped to a 77-month low of 47.1 in August, compared with a final reading of 47.8 in July. The news triggered losses across Asian stocks as well as pressured U.S. stock futures, as global markets are already concerned about a slowdown in China, the world’s second-biggest economy.
Angus Nicholson, market analyst at IG, said the central-bank divergence trade is starting to unwind, with the euro and the Japanese yen among those gaining against the U.S. dollar. “Expect this to continue further as prospects for a (U.S.) September rate increase dissipate and the probability of a December hike continues to fall,” said Nicholson.
Also red: Emerging-market currencies also fell on Friday
On Friday, the People’s Bank of China guided the onshore Chinese yuan sharply stronger, setting the midpoint for its currency at 6.3864 against the U.S. dollar USDCNY, +0.0141% compared with 6.3915 a day earlier. The currency can trade 2% above or below that level. The yuan is currently trading at 6.3884.
