The dollar jumped to its highest this year against the yen yesterday, lifted by strong US economic data, while the euro slipped to a one-year low on speculation the European Central Bank will move towards looser monetary policy laterthis week.
US manufacturing hit a nearly three-and-a-half-year peak in August and construction spending rebounded strongly in July, the latest signs of US econ-omic vigour.
The data lifted the dollar almost 0.8 per cent against the Japanese yen, pushing it above the 105 yen mark for the first time since the first week of this year. The yen last traded at 105.11, up 0.73 per cent on the day.
US Treasuries fell further on the data, with the 10-year note down 19/32 in price to yield 2.41 per cent.
The euro sagged on bets ECB President Mario Draghi will do more to help a wobbly eurozone economy. The euro was down 0.04 per cent at $1.3122.
“Even if Draghi doesn’t announce rate cuts or QE (asset purchases), I think he will open doors to further significant action further down the road and that should be enough to support the market at least for now,” said Nick Stamenkovic, a strategist at RIA Capital Markets in Edinburgh.
Global equity markets and European shares edged lower before the ECB’s meeting tomorrow. Few investors expect major steps but most see looser policy in the future as the euro zone fails to grow due to austerity measures and conflict in Ukraine.
MSCI’s all-country world index of 45 countries fell 0.25 per cent while the pan-European FTSEurofirst 300 index, which has risen nearly seven per cent from its mid-August low, closed down 0.07 per cent at 1,375.93.
Wall Street was mixed.
The Dow Jones industrial average was down 62.96 points, or 0.37 per cent, at 17,035.49.
The Standard & Poor’s 500 Index was down 6.15 points, or 0.31 per cent, at 1,997.22.
The Nasdaq Composite Index was up 2.58 points, or 0.06 per cent, at 4,582.85.
“The market is probably pricing in stronger numbers on the economic side but it’s still very much positive,” said James Liu, global market strategist at JPMorgan Funds, in Chicago.
“We are expecting to see stronger economic numbers, the market is certainly expecting that, and as long we get them we can do quite well above 2,000 on the S&P 500,” Liu said
Brent crude fell below $101 a barrel, pressured by worries about slowing oil demand growth in China and Europe, a strong US dollar and ample supplies.
Brent crude for October delivery was down $2.12 at $100.67 a barrel. US crude was down $2.70 from Friday's close at $93.26 a barrel. There was no trading in the United States on Monday because of the Labour Day holiday.