USD Down on Disappointing Manufacturing Growth, Investors Eye Payrolls

Following an unexpected slowdown in US manufacturing growth, which drove investors to lowering their bets on the booming US economy boosting the national currency, the dollar saw quite some losses on Tuesday.

Data showed shortages of basic materials and transport snarls depressed the Institute for Supply Management manufacturing survey by 4.7 points to 64.7, throwing the dollar off its three-week peak on the yen and two-week high on the euro.

With Asia trade slightly less active due to holidays in Japan and China, the greenback did drift up slightly off overnight levels to settle at 109.14 yen and at $1.2054 per euro. The common currency rose 0.3% overnight and found additional support from a surge in German retail sales and record-high euro zone factory activity.

Investor focus is now on services figures due on Wednesday and payrolls data on Friday.  Some analysts say strong figures might raise the dollar by bringing forward expectations for higher interest rates, while others believe that a strong US economy would, in the contrary, weight on the currency as imports gain and the trade deficit grows.

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