Stock Market Watch

Forex Market Update: Dollar Index Rebounds After ISM Data

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The U.S. dollar index edged up on Monday, paring initial weakness after the Institute of Supply Management’s (ISM) non-manufacturing index showed higher than expected gains in July, underpinning the fact that the U.S. economy is rebounding gradually.

The dollar index, a gauge on U.S. unit’s performance against a basket of six major traded currencies, rose 0.14% to 82.04 on Monday, having hit an intra-day low of 81.75 in early session.

The ISM’s non-manufacturing Purchasing Managers’ Index rose to 56 in July, surpassing economists’ expectation of 53.1. In June the Index showed a reading of 52.2. A reading in excess of 50 indicates expansion in economic activities.

The greenback came under pressure on Friday after the Labor Department’s July non-farm payrolls data showed that the U.S. economy created less-than-expected jobs, fanning speculation that the Federal Reserve might wait for an extended period of a time before it starts tapering its quantitative easing.

An accommodative monetary policy from the Fed keeps the interest rates low; which in turn weighs on the demand for dollar due to unfavorable interest rates differentials.

However, many strategists remain unconvinced that the Fed will provide economic stimulating measures for a long time.

Commenting over the implication of this data over the Fed’s tapering, Ilya Spivak, currency strategist at DailyFX in New York, said, “The service sector accounts for nearly 80 percent of U.S. employment and a pick-up here may be interpreted as bolstering the probability of a reduction in the size of the Federal Reserve‘s monthly asset purchases at September’s FOMC meeting,” according to Reuters.

The euro was last down 0.33% to trade at $1.3240

 








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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