Dollar weakens as yen, sterling see gains

Story link: Dollar weakens as yen, sterling see gains

The US dollar weakened versus the yen and sterling on Monday after a new survey showed that manufacturing activity in the US in November teetered ever nearer contraction rather than expansion.

The Institute for Supply Management’s November factor index reading was down to 50.8 in November after showing a reading of 50.9 in October, with any reading under 50 signaling contraction in the sector.

In early afternoon trade in New York the dollar was at ¥110.4350 in relation to the yen while it traded at $2.0640 to the pound and at $1.4667 to the euro.

Sterling’s gains against the dollar came as analysts backed off their forecasts of an interest rate cut by the Bank of England later this week.

A key manufacturing index was up in November, making analysts believe that the UK economy hasn’t slowed enough yet for the Bank to send rates lower just yet.

Despite the US dollar’s continuing tendency to weakness a number of analysts expect that it will rally next year, with some expecting the greenback to rise as much as 7 percent in relation to the euro in 2008 after having dropped by 10 percent against the shared currency so far this year, citing shrinking budget and trade deficits as evidence for their sentiment.

The yen strengthened after an announcement from Moody’s Investors Service that it will issue sharp credit rating cuts soon, making investors fear credit-market losses could become worse and making them flee risky carry trades.

The Japanese currency was trading at ¥161.9749 to the euro, at ¥227.9431 to the pound and at ¥97.3705 to the Australian dollar at early afternoon in New York.