The Manufacturing Side Of The U.S. Economy Continued Growing In October
The dollar reversed overnight losses Monday against the yen and the euro, supported by optimistic U.S. manufacturing data.
That more encouraging economic snapshot gave pause to the more aggressive bets on expected Federal Reserve stimulus.
The manufacturing side of the U.S. economy continued growing in October with an Institute for Supply Management purchasing managers' index rising to 56.9 from 54.4 in September.
Economists had expected the PMI number to slip to 54.3.
Shortly after the PMI data, the euro hit its intra-day low, falling back below USD1.39, and had reversed all gains garnered overnight from strong Chinese manufacturing data that led to a return to riskier assets.
The dollar further retreated from a new 15-year low reached overnight against the yen following the data. The dollar fell to fresh lows against the yen early Monday before investors backed off, reluctant to risk the possibility of another strong Japanese intervention.
The pair fell to JPY80.21, it's lowest in 15 years and the closest it has come to the JPY79.75 level that has stood since April 1995.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.328 from 77.047.
Dealers said the dollar should keep weakening against not only the euro but also the yen, as short-term speculators are decreasing their holdings of the greenback ahead of a two-day Federal Open Market Committee meeting ending Wednesday.
Many investors think the FOMC will take additional easing measures to prop up the economy. This should push down yields on U.S. bonds and make the U.S. currency less attractive.
EURCHF is now in a bullish trend, with near-term upside potential seen to 1.3924. Above that area, there is scope for gains to 1.4041, say technical analysts. Near-term support is pegged at 1.3540.
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Article Source: FxTradingStock.com
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by: John Fisher
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Date: Wed, 3 Nov 2010
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