Dollar Up as Investors Digest Surprise Fall in U.S. Manufacturing Data

The dollar was up on Tuesday morning in Asia as a surprise slowdown in U.S. manufacturing growth trimmed Investor bets on a booming U.S. economy giving the U.S. currency a boost.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies was up 0.22% to 91.125 by 13:08 AM ET (5:08 AM GMT).

The USD/JPY pair was up 0.21% to 109.28.

The AUD/USD pair was down 0.21% to 0.7744 and the NZD/USD pair was down 0.33% to 0.7174.

The USD/CNY pair was steady at 6.4735 while the GBP/USD pair was down 0.27% to 1.3872.

Japanese and Chinese markets remained closed for a holiday.

The U.S.’ Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on Monday, was a lower-than-expected 60.7 for April. Shortages of basic materials and transport snarls contributed to the drop, which toppled the dollar from a three-week high against the yen and a two-week high on the euro.

The euro rose 0.3%, as investors digested economic data from the region. The German manufacturing PMI was 66.2 for April, while the Eurozone’s manufacturing PMI was 62.9.

Investors are now looking to further data to be released later in the week including the U.S. trade balance and the April U.S. employment report which includes non-farm payrolls.

Some investors suggested that strong figures might boost the dollar by bringing forward expectations for higher interest rates, while others argued that a strong U.S. economy would weigh on the greenback as imports gain and the trade deficit grows.

"The ISM manufacturing report did not live up to expectations but payrolls should be at least as strong as consensus expectations... the U.S. Federal Reserve's dovish influential core won't have any of it, but expectations for solid U.S. data this week and likely more hawkish regional Fedspeak leave the dollar index positioned for more two-way price action," Westpac analysts said in a note.

Benchmark ten-year U.S. Treasury yields fell 2.5 basis points overnight as the data disappointed, and as New York Fed President John Williams insisted that the economic recovery so far is "not nearly enough" to tighten monetary policy.

Investors also await policy decisions from Norges Bank and the Bank of England on Thursday, while the Reserve Bank of Australia (RBA) kept its interest rate steady at 0.10% when it handed down its decision earlier in the day. Investors are also looking for clues on whether RBA will upgrade economic forecasts that are due on Friday. Meanwhile, the Bank of England could announce a slowdown of its bond purchases when it hands down its policy decision on Thursday.

On the cryptocurrency front, ether extended its record run as it climbed to a new record of $3,457.64 before pulling back slightly.