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US dollar surges on manufacturing PMI

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US dollar surges on manufacturing PMI

The greenback surged after the US manufacturing economy accelerated at its fastest pace in more than two years, according to the Institute for Supply Management. New orders outweighed anxieties over the partial government shutdown last month, as 14 of the 18 manufacturing sectors reported growth.

The US currency rose more than 0.7 percent to 80.76 against a basket of its major peers. The dollar managed to retrace all of the losses incurred at the hands of the September FOMC policy meetings, when Fed officials unexpectedly maintained the pace of record stimulus. The dollar has been gaining traction since Wednesday, when the Fed opted once again to maintain the pace of monthly bond buying. This time, however, the Federal Reserve was less dovish, prompting traders to increase their bets on the greenback.

The euro fell to a two-and-a-half week low against the greenback after momentum allowed it to test 1.38 US dollars earlier in the week. The EURUSD fell through the 1.35 handle on a loss of 100 pips. The pair fell through two supports in the process. The single currency has been under pressure amid speculation the European Central Bank could further loosen monetary policy in response to weak euro area consumer inflation.

Elsewhere in Europe, pound sterling lost 120 pips against the US dollar, sending the GBPUSD below the 1.60 handle. The pair was holding on to the 1.5928 support in the North American session. The losses come despite another strong manufacturing report from the UK.

The dollar also enjoyed top marks against the Japanese yen. The ISM report helped propel the USDJPY to 98.80, a gain of half a percent. The pair is expected to remain within the 95-100 range over the next three months, according to UBS.

In North America, the US dollar advanced moderately after the markets responded sharply to stronger than forecasted Canadian GDP growth. The USDCAD was up 10 pips to 1.0445.

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