October 1, 2019 / 8:43 PM / 4 months ago

FOREX-Dollar slides 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

 (New throughout, updates prices and market activity, adds construction spending)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 1 (Reuters) - The dollar fell on Tuesday from its highest level in more than two years,
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 Toronto.
    The United Auto Workers a few weeks ago launched the first company-wide strike at General Motors Co
 in 12 years.
    Ashworth added that the ISM report reinforces the firm's belief "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 the December meeting.
    The dollar was also pressured by a report showing U.S. construction spending barely rose in August.
    The greenback's outlook though 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.
    "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 also underperformed 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 years.
    In late afternoon trading, the dollar index was down 0.3% at 99.12, after earlier touching
99.58, its highest since May 2017.
    The euro was up 0.3% against the dollar at $1.0935.
    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 0.4% against the yen at 107.70 yen.
    The Australian dollar fell 0.7% to US$0.6710 after the RBA cut its cash rate to a record low
of 0.75%.
    Currency bid prices at 4:33PM (2033 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=        107.6900       108.0600    -0.34%         -2.33%      +108.4600   +107.6400
 Euro/Yen         EURJPY=     117.78         117.79      -0.01%         -6.69%      +118.1600   +117.6800
 Dollar/Swiss     CHF=        0.9924         0.9978      -0.54%         +1.12%      +1.0016     +0.9924
 Sterling/Dollar  GBP=        1.2306         1.2287      +0.15%         -3.54%      +1.2340     +1.2208
 Dollar/Canadian  CAD=        1.3222         1.3239      -0.13%         -3.04%      +1.3290     +1.3209
 Australian/Doll  AUD=        0.6703         0.6749      -0.68%         -4.91%      +0.6775     +0.6673
 Euro/Swiss       EURCHF=     1.0852         1.0876      -0.22%         -3.57%      +1.0920     +1.0853
 Euro/Sterling    EURGBP=     0.8886         0.8867      +0.21%         -1.09%      +0.8936     +0.8847
 NZ               NZD=        0.6241         0.6261      -0.32%         -7.09%      +0.6272     +0.6204
 Dollar/Norway    NOK=        9.1283         9.0935      +0.38%         +5.67%      +9.1476     +9.0913
 Euro/Norway      EURNOK=     9.9835         9.9127      +0.71%         +0.78%      +9.9843     +9.9082
 Dollar/Sweden    SEK=        9.8787         9.8408      +0.73%         +10.21%     +9.9303     +9.8405
 Euro/Sweden      EURSEK=     10.8041        10.7261     +0.73%         +5.26%      +10.8110    +10.7209
 (Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Larry King, Matthew Lewis, Tom Brown and
David Gregorio)
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