Forex U.S. Review – Dollar weakens after weak manufacturing data, euro gains

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The euro climbed to a near three week high against the dollar boosted by risk appetite that has come about due to optimism for the upcoming meeting tomorrow between French President Nicolas Sarkozy and German Chancellor Angela Merkel to discuss the euro zone debt crisis. Meanwhile a weak dollar helped lift euro following disappointing New York manufacturing index. The euro also benefited from news that the European Central Bank spent 22 billion euros on government debt last week, as it restarted a bond-buying program to stem the spread of the euro zone debt crisis to Spain and Italy. EURUSD advanced to a high 1.4477 from the open of 1.4294.

The British Pound performed well today against the dollar but not from its own merit. Due to lack of macroeconomic data during the session, Sterling gained as a consequence of a weaker dollar that was battered after the release of weak manufacturing data for the New York sector. Soon after the data, GBPUSD accelerated its rise to 1.6408 versus a session open level of 1.6309. The pound also took direction from a rising euro.

The Swiss franc traded against the euro in a range that the Swiss National Bank would probably be comfortable with between 1.1245 and 1.1377. Earlier in the day the franc was weakened sharply after a newspaper report suggested the bank would peg the currency to the euro in an effort to stem franc strength. The dollar fell against the Swiss franc after weak U.S. data on manufacturing, consequently bringing down USDCHF to a session low of 0.7787 before rebounding to 0.7882.

USDJPY see sawed from the open of 76.79 down to 76.58 after weak US data, then back up to close to where it started at 76.83. The dollar was little changed against the yen since August 11, and is pretty much range bound slightly above the record low of 76.28 hit in mid-March after the Japan earthquake. Investors are reluctant to push the yen higher because of the threat of Japanese intervention to weaken it, but are equally reluctant to sell yen against the dollar as they are still cautious about the current U.S. growth slowdown .

The Canadian dollar gained against the U.S. greenback after a slide in manufacturing in New York State dented sentiment bringing back a negative tone on global growth which prevailed the prior week. The index showed the sector unexpectedly contracted for a straight third month in August. USDCAD opened the session at 0.9873 and accelerated its fall after the weak data falling to a low of 0.9798.

Gold prices gained for the first time since it began a decline on Thursday. A weaker US dollar revived demand for the precious metal as an alternative safe haven investment. Gold and the dollar usually have an inverse relationship. Spot gold rose from an early session low of $1,732.37 to $1,764.82.