Dollar Starts 2009 Edging Higher

NEW YORK - The dollar kicked off 2009 by gaining against most of the other major currencies as a spate of negative reports out of Europe counteracted decades-low U.S. manufacturing data.

The euro slipped to $1.3928 in morning trading in New York Friday from $1.3954 late Wednesday in New York. U.S. markets were closed Thursday for a public holiday.

Slovakia on Thursday became the 16th country to adopt the common European currency.

Meanwhile, the British pound fell to $1.4499 from $1.4556 on New Year's Eve.

Friday, the Insitute of Supply Managment, a U.S. trade group, said its manufacturing index fell to 32.4 in December, a 28-year low. The index read 36.2 in November. A reading under 50 indicates contraction.

No industries reported growth, while the readings for new orders fell to their lowest level since 1948.

But news out of Britain and the euro zone was also abysmal, and came ahead of monetary-policy meetings in the next two weeks. Both the European Central Bank and the Bank of England are under pressure to trim interest rates - from 2.5% and 2%, respectively - in order to help stimulate economic activity.

Cutting interest rates can undermine a currency as investors seek higher returns elsewhere. The interest-rate play for the pound and euro may be diminishing in appeal as their respective central banks appear set to chop rates closer to those in the U.S., Japan and Switzerland - all hovering around zero.

In Europe, the euro zone's monthly purchasing managers index fell at its sharpest pace in 11 years to 33.9 in December from 35.6 in November. December's reading is also the lowest in the survey's 11-year history.