October 1, 2019 / 7:53 PM / 6 months ago

FOREX-Dollar retreats after weak U.S. manufacturing data

    * Dollar index drops from 2-1/2-year high
    * U.S. ISM manufacturing index falls in September
    * U.S. construction spending rises less than expected
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds new comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 1 (Reuters) - The dollar fell from its highest
level in more than two years on Tuesday, undermined by data
showing weakness in the U.S. manufacturing sector and a
lower-than-expected rise in construction spending.
    Against the yen, the dollar slid from two-week highs, as the
weak manufacturing report fueled concerns the United States may
be headed for recession.
    Data showed the U.S. manufacturing sector contracted in
September to its weakest level in more than a decade as business
conditions worsened amid U.S.-China trade tensions.
    The Institute for Supply Management (ISM) said its index of
national factory activity fell to 47.8, the lowest reading since
June 2009. A reading below 50 signals the domestic factory
sector is contracting.
    "Our guess is that this weakness is at least partly due to
the all-out strike at GM, which began in mid-September," said
Paul Ashworth, chief U.S. economist at Capital Economics in
    The United Auto Workers a few weeks ago launched the first
company-wide strike at General Motors Co in 12 years.

    "Nevertheless, it reinforces our belief that despite the
hawkish protestations of some officials in recent days, the
Federal Reserve will still cut interest rates by a further 25
basis points at December's FOMC meeting.
    The dollar's outlook remained solid despite Tuesday's weak
data, analysts said.
    "Even though the Fed is lowering interest rates, the dollar
is not exactly losing ground because of the domino effect:
everybody is following the Fed in cutting rates," said Juan
Perez, senior currency trader at Tempus Inc in Washington.
    "At the this point, with an economy that's growing at 2% on
a quarterly basis while the rest of the world is struggling, 
the dollar looks like to be the safer asset."
    Elsewhere, the Australian dollar was the main underperformer
in the G10 space on Tuesday after the Reserve Bank of Australia
cut interest rates and expressed concern about job growth
    With rate cuts in Australia, final PMI readings in Europe at
seven-year lows and weak confidence readings in Japan, the
dollar scored its biggest quarterly gain in the third quarter
since June 2018.
    On Tuesday, a September survey showed euro zone
manufacturing activity had contracted the most in almost seven
    In afternoon trading, the dollar index was down
0.2%99.14, after earlier touching 99.58, its highest level since
May 2017.
    The euro was up 0.3% against the dollar at $1.0933.
    In Japan, its big manufacturers' business confidence
worsened to a six-year low in the July-September quarter, the
Bank of Japan's closely-watched Tankan survey showed.

    The yen initially weakened after the Tankan data, but firmed
against the dollar after the weak U.S. manufacturing report. The
dollar was last down 0.3% at 107.740 yen.
    Elsewhere, the Australian dollar fell 0.7% to
US$0.6710 after the RBA cut its cash rate to a record low of
0.75%, as expected.
    Currency bid prices at 3:39PM (1939 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.0936        $1.0898     +0.35%         -4.65%      +1.0942     +1.0880
 Dollar/Yen       JPY=        107.7000       108.0600    -0.33%         -2.32%      +108.4600   +107.6400
 Euro/Yen         EURJPY=     117.79         117.79      +0.00%         -6.68%      +118.1600   +117.6800
 Dollar/Swiss     CHF=        0.9927         0.9978      -0.51%         +1.15%      +1.0016     +0.9927
 Sterling/Dollar  GBP=        1.2304         1.2287      +0.14%         -3.55%      +1.2340     +1.2208
 Dollar/Canadian  CAD=        1.3216         1.3239      -0.17%         -3.09%      +1.3290     +1.3209
 Australian/Doll  AUD=        0.6703         0.6749      -0.68%         -4.91%      +0.6775     +0.6673
 Euro/Swiss       EURCHF=     1.0859         1.0876      -0.16%         -3.51%      +1.0920     +1.0858
 Euro/Sterling    EURGBP=     0.8885         0.8867      +0.20%         -1.10%      +0.8936     +0.8847
 NZ               NZD=        0.6243         0.6261      -0.29%         -7.06%      +0.6272     +0.6204
 Dollar/Norway    NOK=        9.1278         9.0935      +0.38%         +5.66%      +9.1476     +9.0913
 Euro/Norway      EURNOK=     9.9838         9.9127      +0.72%         +0.79%      +9.9839     +9.9082
 Dollar/Sweden    SEK=        9.8736         9.8408      +0.69%         +10.15%     +9.9303     +9.8405
 Euro/Sweden      EURSEK=     10.7997        10.7261     +0.69%         +5.22%      +10.8110    +10.7209
 (Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by
Larry King, Matthew Lewis and Tom Brown)
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