The greenback was strengthening against the other major currencies Tuesday after traders gave new economic data a positive spin.
Euros were trading for $1.3606, down from $1.3626 late Monday. The British pound was selling for $2.012, down from $2.0194 a day earlier. The dollar was rallying against the yen, buying 116.21 yen up from 115.89 previously.
The Institute for Supply Management says its manufacturing index fell to 52.9 in August, slightly below consensus forecasts of 53 and down from 53.8 in July. But it was news that the employment component of the index rose to 51.3 from 50.2 that perked investor interest in the dollar.
A figure over 50 represents an expanding segment, whereas one below that level shows contraction.
"It was quite positive that the employment component edged up, and that was especially so after falling earlier in the year," explains Ashraf Laidi, chief foreign exchange analyst at CMC Markets in New York. "As a result, we are seeing a rare case of broad dollar gains."
More commonly, he says, dollar strength against low-yielding currencies such as the Japanese yen would be matched with weakness vs. the higher yielding currencies, such as the euro and the pound, in what is known as the yen carry trade. That involves traders selling short the Japanese currency and buying euros and pounds with the proceeds.
PowerShares DB G10 Currency Harvest
exchange-traded fund, which seeks to benefit from the carry trade, was moving ahead, up 0.5% recently.
The ETFs tracking the value of individual currencies were moving in line with action in the spot forex market. The
CurrencyShares British Pound Sterling Trust
CurrencyShares Euro Trust
, were lower by 0.4% and 0.1%, respectively.
CurrencyShares Japanese Yen Trust
was falling 0.5%.