USD strong on ISM manufacturing index increase

Story link: USD strong on ISM manufacturing index increase

The US dollar was strong on Friday after the release of data from the Institute of Supply Management that showed its manufacturing index up to 53.8 in June when it had not been expected to rise above May’s figure of 51.4.

Another factor in the dollar’s strength were comments from the Federal open market committee that make it sound like the Fed will continue to raise interest rates at the current pace for the foreseeable future. Some analysts took this to indicate that US interest rates might reach 4.25 by the end of 2005.

The dollar gained 1.1 percent to $1.1958 in relation to the euro, a 13-month high.

It was up 0.8 percent for the day and 2.2 percent for the week to ¥111.64 against the yen, and up 1.1 percent on the day and 2.9 percent on the week in relation to sterling, to $1.7705.

The US dollar gained 1.4 percent to C$1.2416 against the Canadian dollar. The Australian dollar lost 2.4 percent for the week to the US dollar, to $0.7516, while the New Zealand dollar lost 3.1 percent to $0.6834 in relation to the greenback.

Even though the euro declined in relation to the US dollar, there are signs that sentiment against the euro, created by the French and Dutch votes against the European Union constitution, is beginning to subside.

The euro gained 1.2 percent for the week to ¥133.53 in relation to the yen.

The yen has remained weak since the steep decline in Japan’s trade surplus was announced.

Meanwhile, sterling’s weakness stems from lagging retails sales and low economic growth figures as well as on speculation that UK interest rates might soon be cut.

Sterling lost 1.9 percent this week to £0.6751 in relation to the euro, was down 0.7 percent on the week to ¥197.67 against the yen, and declined 1.3 percent for the week to SFr2.2940 in relation to the Swiss franc.