During early European deals on Monday, the US dollar advanced to a new multi-week high against the UK pound. The dollar also rose to a 4-day high against the Japanese yen. On the other hand, the dollar weakened against the euro, but it showed choppy trading against the franc.
The dollar that fell to 107.48 against the yen at 9:55 pm ET Sunday reversed direction thereafter. The dollar-yen pair reached a 4-day high of 108.08 by about 4:55 am ET Monday compared to 107.70 hit late New York Friday. If the dollar advances further, it may test resistance around the 108.4 level.
Japan's monetary base fell 0.7 percent on year in July to 87.85 trillion yen, the Bank of Japan said today. Banknotes in circulation were up 0.6 percent and coins in circulation added 0.8 percent. The current account balances were down 12.3 percent on year, including a 12.2 percent fall in reserve balances. Seasonally adjusted, the monetary base was down an annual 14.5 percent to 87.9 trillion yen.
During early deals on Monday, the dollar gained against the pound and reached a new multi-week high of 1.9687 at 3:50 am ET. On the upside, the dollar is likely to target the 1.941 level against the pound. The pound-dollar pair was worth 1.9752 at last week's close.
The pound weakened today as the manufacturing confidence declined in every UK region on intense cost pressures. The Regional Trends Survey conducted by the Confederation of British Industry, or CBI and Experian showed today that firms expect weakness in manufacturing activity across most of the regions and see further increase in cost.
Peter Gutmann of Experian stated "Exports are helping to limit the slowdown in the manufacturing sector, boosted particularly by sterling's weakness against the euro. However, the near-term outlook for manufacturing still looks tough as the economy enters a precarious phase."
A separate report from the Chartered Institute of Purchasing & Supply and Markit showed today that UK's seasonally adjusted construction Purchasing Managers' Index continued its downward trend to reach a new series low of 36.7 in July. The index stood below the expected reading of 37.3 and a level below 50 suggests contraction in the construction sector.
Against the euro, the dollar slipped in early trading on Monday. The dollar that closed Friday's deals at 1.5555 against the euro dipped to 1.5600 at 4:40 am ET. The next downside target level for the dollar is seen around 1.5700 against the euro.
Euro-zone producer price index increased 8% year-on-year in June, quicker than 7.1% rise recorded in May. The current growth pace is slightly faster than 7.9% increase predicted. On a monthly basis, the PPI rose 0.9% in June, slower than 1.2% increase recorded in May, while the consensus forecast was for 0.8% rise.
In addition, the latest survey results showed that the Sentix investor confidence dropped to a level of minus 15.3 in August from minus 9.3 in July. Economists were looking for a reading of minus 10 for August. The August reading is the lowest since July 2003, when it was minus 15.
The dollar declined to 1.0468 against the Swiss currency by about 11:20 pm ET Sunday. Since then, the dollar-franc pair has been showing choppy trading and is now worth 1.0482. The pair closed previous week's trading at 1.0501.
Swiss SVME Purchasing Managers Index, or PMI decreased to 54.1 in July from 54.9 in June, the Credit Suisse reported today. Economists had expected the index to remain unchanged. This is for the first time since mid 2005 the indicator fell below its long-term average of 54.5 points. A PMI reading above 50 signals expansion, while below 50 suggests contraction.
Investors now look forward to the US personal income and spending, core PCE and the factory orders report, which are expected to drive deals in the upcoming North American session.
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