The dollar rises as US business activity picks up in October

The dollar rises as US business activity picks up in October

NEW YORK (Reuters) – The dollar rose against a basket of currencies on Tuesday as a series of new economic data highlighted the strength of the U.S. economy compared to the United Kingdom and the European Union.

Standard & Poor’s Global said on Tuesday that US corporate production rose in October as the manufacturing sector emerged from a five-month contraction thanks to a rise in new orders, and services activity accelerated modestly amid signs of easing inflationary pressures.

It was the latest sign that the US economy can withstand the rise in interest rates, which has been stimulated by the Federal Reserve’s campaign to beat inflation.

The dollar index, which measures a currency’s strength against a basket of six rivals, rose 0.6% to 106.27. The index had fallen to its lowest levels in a month at 105.35 earlier in the session.

“It is clear that the big picture remains intact, especially when comparing the US PMI to the simultaneous releases from the UK and Eurozone this morning,” said Helen Giffen, FX trader at Monex USA.

“While all three US PMI readings (manufacturing, services and composite) were positive, both the UK and Eurozone showed contractions, reaffirming the continued resilience of the larger US economy compared to peers around the world.”

Earlier on Tuesday, survey data showed that business activity in the euro zone took a surprising turn for the worse this month amid a widespread slowdown across the region, suggesting that the bloc could slide into recession.

The euro fell in recent trading by 0.8 percent to $1.0588.

German data was particularly bleak. The PMI survey showed that the services sector joined the manufacturing sector in contractionary territory.

The Bank of England is scheduled to set interest rates on Thursday next week, following the Federal Reserve’s decision on Wednesday. The European Central Bank meeting ends on Thursday, with traders expecting the three central banks to keep interest rates steady.

“Preliminary October PMI surveys suggest that economic activity is off to a weak start in the fourth quarter, especially in Europe,” Ariane Curtis, global economist at Capital Economics, said in a note.

“With weak activity taking some momentum away from labor markets and inflation, we are growing more confident in our view that the Fed, ECB and Bank of England are done raising interest rates,” she said.

Global financial markets have been reeling from rising US bond yields, which on Monday pushed the yield on the benchmark 10-year Treasury note above 5% to its highest level since July 2007. Rising yields pushed the dollar index to its highest level in almost a year. Advance this month.

The yield fell sharply later on Monday. One motivating factor was a social media message by prominent hedge fund investor Bill Ackman, saying he had ended his bet against longer-term bonds and that geopolitical concerns were a factor, analysts said. Yields rise as prices fall and vice versa.

The dollar rose in recent transactions by 0.1 percent to 149.91 yen, which raised traders’ concerns about possible government intervention to support the Japanese currency.

The pound sterling fell in recent trading by 0.72% to $1.2161. British companies recorded another decline in activity this month and cost pressures eased further, surveys showed on Tuesday, highlighting the risk of recession.

In cryptocurrency markets, Bitcoin continued to rise, fueled by speculation that a Bitcoin exchange-traded fund is imminent. The world’s largest cryptocurrency by market cap was last up 2.4% to $33,850.

Reporting by Saqib Iqbal Ahmed;

Our Standards: The Thomson Reuters Trust Principles.

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