Positive US economic data supports dollar

Published: 2 Oct at 9 AM Tags: Euro, Dollar,

The dollar may have been down against a basket of other major currencies yesterday, but there has been some recovery since jitters in the market over the government shut down in Washington. The greenback was given some support after positive manufacturing data was released. Manufacturing activity is growing faster than it has in well over two years and new job figures are up to a 15 month high.

What happens to the dollar now will depend on how long it takes for the government to resolve its budget problems. In 2011 similar debt problems caused a downgrade of Standard & Poor’s credit rating for the US. It also hit the dollar because of a drop in consumer confidence.

Safe haven currencies, like the Swiss franc and the yen, have risen against the greenback. The dollar settled at 0.9051 francs after earlier hitting 0.8989 francs, the lowest it has been against the Swiss currency since February last year.

The dollar index is also down 0.14 per cent to 80.100 after hitting a low of 79.864. The euro managed to touch an eight-month high against its US counterpart at $1.3588 before giving up 0.5 per cent to drop to $1.3531.

The single currency has managed to hold its ground after the political problems in Italy drove it down. It now looks likely that Prime Minister Enrico Letta and his coalition government will survive today’s confidence vote.