Dollar Falls Slightly as Market Disappointed by Weak U.S. Manufacturing Data

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Dollar Falls Slightly as Market Disappointed by Weak U.S. Manufacturing DataThe dollar remained resilient against a pool of major currencies on Tuesday after declining the day before due to disappointing U.S. factory activity.

The dollar index closed at 79.952, down from Monday’s intraday peak of 80.290 and three-week high of 80.354 touched the previous Thursday.

The dollar had earlier fell on Monday after research firm Markit disclosed that its initial U.S. Manufacturing Purchasing Managers Index had slid to 55.5 in March, down from 57.1 a month earlier, as reported by Reuters.

The dollar had earlier risen to week highs after Federal Reserve Chair Janet Yellen hinted that interest rates may rise earlier than anticipated. However, traders reiterated that the dollar’s momentum needed to be backed by favorable U.S. economic figures.

Unfortunately, data released recently is contrary to this notion, despite the fact that it points to a gradual recovery of the world’s biggest economy.

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“Even with the move down in the headline (PMI reading) in March, it remained pretty solid and many of the underlying details also looked strong in March,” said JPMorgan’s analysts in a note to clients.

“This reinforces our contention that U.S. data should be more supportive of higher US Treasury rates and hence the USD as weather effects and inventory distortions fade.”

The euro strengthened against the greenback to steady at about $1.3835, up from Monday’s intraday low of $1.3760. However, the dollar climbed 0.1 percent to 102.33 yen, which was however slightly below Monday’s peak of 102.65 yen.

“Activity has been pretty dull, it seems as if players haven’t been making too much moves,” said a Tokyo-based trader working for a European bank. He further added that the market was eyeing the developments in Ukraine closely.

 To contact the reporter of this story; Jonathan Millet at john@forexminute.com