British pound touches highest since November after PMI
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar weakened on Tuesday to its lowest level since November after a generally strong round of economic data from Europe prompted investors to further trim safe-haven flows that had been inspired by the turmoil in Egypt.
The dollar index (DXY 77.37, -0.37, -0.47%) , which tracks the greenback against a basket of six other currencies, slipped to 77.340 from 77.777 late Monday. It fell as low as 77.294, the lowest in almost three months.
The euro (EURUSD 1.3760, +0.0074, +0.5407%) changed hands at $1.3767, up from $1.3689 in late North American trading Monday. It reached as high as $1.3775, its loftiest level since mid-November.
The dollar also fell against the British pound and Australian dollar due to strong factory data and central bank comments, respectively.
The single currency got a lift from an unexpected jump in the final January Markit purchasing managers index for the manufacturing sector, which showed euro-zone factory activity accelerated at its fastest pace in nine months. Moreover, the data showed signs of activity picking up in peripheral nations while overall activity remained led by Germany. Read more on euro-zone manufacturing PMI.
The figures “confirmed that growth remained robust in January and suggested that it is now more broadly-based across countries,” said Andrew Grantham, economist at HSBC.
Also Tuesday, German unemployment showed a seasonally adjusted decline of 13,000 in January, the nation’s Federal Labor Office reported. The drop was larger than forecast.
Investors’ shift into riskier assets has been tentative, as protests in Egypt are expected to bring one million people to the streets.
Egypt’s recent turmoil is no longer directing market activity, but “markets are still watching ... closely as impacts are clearly being felt from higher oil and agricultural prices with growing concerns over supply disruptions and food hoarding,” said Credit Agricole analyst Burin Adulwattana in a note to clients.
U.K. manufacturing
The British pound (GBPUSD 1.6108, +0.0090, +0.5619%) also jumped, climbing to the highest since mid-November against the U.S. dollar. Sterling changed hands at $1.6106, up from $1.6020 on Monday.
The spike higher came after the U.K. manufacturing PMI jumped to a record 62.0 for January. Read about the U.K. manufacturing PMI.
“A surprisingly strong UK PMI helped ease concerns that enveloped Britain after last week’s weak GDP report,” said strategists at Brown Brothers Harriman. It also fuels optimism that the first quarter will be stronger, they said.
Against the Japanese yen, the dollar (USDYEN 81.6300, -0.4200, -0.5119%) fell to ¥81.64, down from ¥82.07 late Monday.
Higher rates seen in Australia
During the Asian trading session, the Australian dollar rose after the country’s central bank signaled higher interest rates could be ahead.
The Reserve Bank of Australia kept its key cash rate on hold at 4.75%, as had been widely expected, saying that its policy is appropriate. Read about Reserve Bank of Australia.
Details in the bank’s statement “did appear to point to upside risks to growth and inflation,” noted Gavin Stacey, chief Australian and New Zealand rates strategist for Barclays Capital, in emailed comments.
The Australian dollar (AUDUSD 1.0074, +0.0106, +1.0633%) bought $1.0086, up 1% and rising above parity to the U.S. unit for the first time since Thursday.
