US dollar declines on drops in manufacturing, confidence

Story link: US dollar declines on drops in manufacturing, confidence

The US dollar weakened versus the euro, the yen, and the Australian dollar on new data that did not bode well for the US economy.

The New York Federal Reserve’s general economic index dropped to -11 in February, from 9 in January, its first contraction in nearly 3 years signaling a decline in manufacturing in the New York region.

Consumer confidence was also down in the United States as the Reuters/University of Michigan index dropped to 69.6 in February from 78.4 in January.

In addition, former Federal Reserve chairman Alan Greenspan said in remarks at a conference in Houston that the US economy is on “the edge” of recession.

At around 11:30 a.m. in New York, the dollar traded at $1.4685 to the euro and at ¥107.6600 versus the yen, while it took A$1.0906 to buy a US dollar.

The yen declined earlier in the session as the Bank of Japan held interest rates steady at 0.5 percent as expected, but it made back the losses when European and US equities markets declined, making investors leery about carry trades.

In late morning trade in New York, the yen traded at ¥158.0987 to the euro and at ¥211.2181 to the pound.

The pound was weaker on the day but still made gains over the week, falling Friday on concerns that the US economy will enter a recession that will hurt demand for higher-yielding currencies.

Additionally, new data showed that housing starts in the UK were down in 2007, with the fewest homes built since 2003.

It took $1.9619 to buy a pound in New York just before noon while it took 74.85p to purchase a euro.