In European trading on Tuesday, the U.S. dollar remained stable, hovering close to its recent four-month peak, buoyed by robust economic data that tempered expectations of imminent interest rate cuts by the Federal Reserve.
At 05:40 ET (10:40 GMT), the Dollar Index, a gauge of the greenback against six other major currencies, held steady at 104.755, just below the previous session’s peak of 105.07, its highest level since November last year.
Dollar Supported by Strong Economic Data
The U.S. dollar received a lift on Monday following the release of data showing the first expansion in U.S. manufacturing since September 2022. This positive economic news has led traders to scale back expectations of early rate cuts by the Federal Reserve, providing support for the dollar.
The CME’s FedWatch tool now indicates a 61.3% probability of a Fed rate cut in June, down from around 70.1% a week earlier.
With more economic data scheduled for release on Tuesday, including job openings and durable orders for February, market participants are keenly awaiting Friday’s highly anticipated payrolls report for March.
Euro Weakens on Deteriorating Manufacturing Activity
Meanwhile, the euro slipped 0.1% against the dollar to 1.0738, following the release of data showing a further decline in eurozone manufacturing activity in March. Although the final eurozone manufacturing Purchasing Managers’ Index came in slightly above expectations, it still indicated a contraction in activity for the 21st consecutive month.
Sterling Gains on Positive Manufacturing Data
In contrast, the British pound rose 0.2% versus the dollar to 1.2569, rebounding from recent losses after British manufacturers reported growth in activity for the first time in 20 months. The S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index exceeded expectations, suggesting an end to last year’s shallow recession.
Yen Remains Under Scrutiny Amid Concerns of Intervention
The Japanese yen traded slightly higher against the dollar at 151.68, close to its weakest level in 34 years. Finance Minister Shunichi Suzuki reiterated that authorities are prepared to take action to address excessive currency movements, amid concerns about the yen’s depreciation.
Yuan Declines to 4-1/2-Month Low
Lastly, the Chinese yuan slipped 0.1% against the dollar to 7.2358, reaching its lowest level in over four months. State-owned banks’ selling of the U.S. currency failed to offset the yuan’s decline, raising concerns about China’s exchange rate policies.
As global economic conditions continue to evolve, investors remain vigilant for further developments that could impact currency markets worldwide.
