The US Dollar recovered some ground yesterday after a sharp sell-off in the previous session as weak economic data from the eurozone shifted investors’ focus away from problems in the US.
The eurozone manufacturing purchasing managers’ index fell sharply from 47.6 in August to 45.3 in September, the weakest reading since December 2001 and well below consensus forecasts.
Aurelio Maccario at Unicredit said the figures confirmed that the slowdown in the eurozone was severe and would be prolonged and would eventually force the European Central Bank to cut interest rates.
“Softening growth will progressively lead to a more dovish stance from the ECB,” said Maccario. “We see the first rate cut in the second quarter of next year.”
By mid-morning in New York, the euro fell 0.4 per cent to US$1.4732 against the dollar, lost 0.3 per cent to GBP 0.7942 against the British pound and eased 0.3 per cent to JPY155.52 against the yen.
Meanwhile, the dollar stabilised after a sharp fall on Monday amid worries over the US Government’s proposed U$700bn plan to bail out the financial system.
Analysts said the dollar slid on concerns over the US Government’s fiscal position and the resultant inflationary impact should the rescue package be implemented.
However, the dollar regained some poise yesterday, rising 0.2 per cent to US$1.8540 against the British pound, climbing 0.2 per cent to JPY105.57 against the Japanese Yen and gaining 0.8 per cent to SFr1.0815 against the Swiss franc.
