Forexpros – The U.S. dollar was rangebound against the other major currencies on Tuesday, as better-than-expected Chinese manufacturing data bolstered market sentiment, but concerns over the deteriorating situation in the euro zone kept markets in check.
During European morning trade, the dollar was steady close to a two-year high against the euro, with EUR/USD dipping 0.03% to 1.2113.
Investor confidence was boosted after data showed that China’s HSBC purchasing managers index improved to 49.5 in July, its highest level since February, from a final reading of 48.2 in June.
While the index remained below the 50 level which indicates contraction, the improvement from the previous month eased concerns over a slowdown in the world’s second largest economy.
But concerns over the situation in the euro zone remained in focus after rating’s agency Moody’s cut its outlook on Germany to negative from stable overnight.
Earlier Tuesday, data showed that manufacturing activity in Germany slowed to the lowest level in more than three years in July, while manufacturing activity in the euro zone contracted at the fastest pace since May 2009.
Investors also remained fearful that Spain will be the next euro zone member to require a full-scale bailout after two regional authorities requested financial assistance from Madrid over the weekend.
Market participants were looking ahead to the results of an auction of Spanish government bonds later in the day, amid concerns over the country’s soaring borrowing costs.
The greenback was fractionally higher against the pound, with GBP/USD inching down 0.08% to hit 1.5495, but edged up against the Swiss franc, with USD/CHF rising 0.07% to trade at 0.9917.
The greenback was lower against the safe-haven yen, with USD/JPY down 0.30% to 78.14.
The yen remained supported after Japanese Finance Minister Jun Azumi reiterated Tuesday that Tokyo was ready to take decisive action against speculative moves or excessive volatility in the yen, in order to shield the largely export based economy from the effects of the currency’s strength
The greenback was broadly weaker against its Canadian, Australian and New Zealand counterparts, with USD/CAD inching up 0.03% to 1.0192, AUD/USD rising 0.25% to 1.0282 and NZD/USD adding 0.45% to trade at 0.7910.
Reserve Bank of Australia Governor Glenn Stevens said earlier Tuesday that Australia’s economy was becoming strong enough to cope with global shocks arising from the euro zone debt crisis or a slowdown in China and added that current monetary policy was appropriate.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.15% to 83.89.
Later in the day, the U.S. was also to release preliminary data on manufacturing activity, while Federal Reserve Chairman Ben Bernanke was to speak.
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