US Dollar Posts Modest Rise on Strong Manufacturing, Construction Data

The US dollar is recording modest gains on Tuesday as investors remain cautious in the broader financial markets. The greenback is mostly finding support on better-than-expected manufacturing and construction data, as well as traders finalizing their year-end positions.

In November, the IHS Markit manufacturing purchasing managers’ index (PMI) came in at 56.7, up from 53.4 in October. This is in line with the median estimate. The US manufacturing sector reported gains in output, new orders, and business sentiment amid stronger domestic and foreign demand.
The Institute of Supply Management (ISM) also released its manufacturing readings, reporting that the PMI dropped to 57.5 last month. New orders slipped from 67.9 in October to 65.4 in November, and employment fell into contraction territory, declining from 53.2 in October to 48.4 in November – anything below 50 indicates contraction. Manufacturing prices remained relatively unchanged at 65.4.
Unit labor costs plunged 6.6% in the third quarter, while non-farm productivity increased by 4.6% in the July-to-September period.
According to the US Census Bureau, construction spending rose 1.3% year-over-year in October, climbing to a seasonally-adjusted annual rate of $1.44 trillion. This is up from the 0.5% slump in September, and it beat the market forecast of 0.8%.
In other data, the National Federation of Independent Business (NFIB) Optimism Index dropped to 101.4 in November, from 104 in October. New Autodata Corporation data found that total vehicle sales decreased for the second consecutive month to 15.55 million in October. US Consumer credit grew at a 2.1% annual rate in October, down from the 4.4% boost in September.
The broader financial markets were subdued, seesawing into positive and negative territory. The Dow Jones Industrial Average rose 100 points, the S&P 500 edged up 0.13%, and the Nasdaq Composite Index dipped 0.03%. The US bond market was mixed on Tuesday, with the benchmark 10-year Treasury down 0.013% to 0.915. The one-year note was unchanged at 0.104%, while the 30-year bond shed 0.018% to 1.67%.
The US Dollar Index, which measures the greenback against a basket of currencies, advanced 0.17% to 90.95, from an opening of 90.90, at 15:52 GMT on Tuesday. The index has had a rough 2020, slumping close to 6% year-to-date. Despite peaking at 103.00 earlier this year, the index has been in a freefall, cratering about 15% as investor confidence in the global financial markets grows.
The USD/CAD currency pair rose 0.09% to 1.2811, from an opening of 1.2797. The EUR/USD edged up 0.02% to 1.2111, from an opening of 1.2109.
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