Dollar slides broadly as data eases growth fears

By Aleksandra Michalska

NEW YORK (BestGrowthStock) – The U.S. dollar fell against major currencies on Wednesday after upbeat data around the world soothed worries about the health of the global economy, boosting investors’ appetite for riskier assets.

The U.S. manufacturing sector grew more quickly than expected in August, China’s factory activity regained momentum, and Australia’s economy grew at its fastest pace in three years last quarter.

The euro climbed above $1.2850 earlier and the Australian dollar soared 2 percent against the U.S. currency as stocks and commodities rallied amid reduced fears of a renewed global slowdown.

Analysts cautioned that the risk rally could be short lived as the global economy is by no means out of the woods. They expect safe-haven currencies to remain firm after the yen hit a 15-year high last week on fears the U.S. economic recovery was faltering.

“What we’ve seen is a bit move away from the U.S. dollar,” said Brendan McGrath, manager of business solutions at Custom House, a Western Union company, in Victoria, British Columbia.

“Risk is back in favor a little bit today, mainly due to the good Australian and Chinese data,” he said.

In late afternoon trading, the ICE Futures U.S. dollar index (Read more about the global trade. ), which tracks the greenback versus a basket of six currencies, fell 0.8 percent to 82.500 (.DXY: ).

The euro rose 0.9 percent to $1.2800.

The Australian dollar jumped more than 2 percent to US$0.9092. It had earlier hit a session peak of US$0.9098, the highest in three weeks, after Australian gross domestic product data revived expectations of a further rise in interest rates.

In the United States, the Institute for Supply Management’s index of national factory activity rose to 56.3 in August from 55.5 in July. That was above market expectations for 53.0 and helped investors shrug off a separate report showing U.S. private employers unexpectedly cut 10,000 jobs in August.

The government’s monthly report on payrolls is a key indicator on the health of the labor market.


Against the yen, the dollar rose 0.3 percent to 84.41 yen. It had earlier hit a session low of 83.69 yen, according to Reuters data, within striking distance of a 15-year low of 83.58 set on electronic trading platform EBS last Tuesday.

The euro climbed 1.2 percent to 108.02 yen. The yen earlier came under pressure after Japanese ruling party powerbroker Ichiro Ozawa, challenging Prime Minister Naoto Kan in a party leadership vote, said he would implement steps, including intervention, if the yen rose sharply.

The yen’s rapid advance in recent weeks prompted Japanese authorities to announce easing measures on Monday. A strong yen makes Japan’s exports more expensive and reduces their competitiveness. Traders and analysts said that, short of direct intervention in the foreign exchange market (Read more about international currency trading. )s, the yen is bound to test its all-time high against the dollar of 79.75 yen set in April 1995.

Last week’s data from the Commodity Futures Trading Commission on currency speculators showed net long yen positions rose to 51,069 contracts and total long yen positions hit 63,086 contracts.

Scotia Capital says record net yen long positions posted at 65,920 contracts on March 25, 2008, with record yen longs at 94,654 on March 4, 2008.

The larger the number of long yen contracts, the more speculators will have to scramble to reverse positions to prevent losses in the event of a decline in yen and a rally in the dollar. The next report is due out on Friday.

(Additional reporting by Vivianne Rodrigues, Wanfeng Zhou and Nick Olivari in New York; Editing by Leslie Adler)

Dollar slides broadly as data eases growth fears