US dollar slips after dim US, China data

[NEW YORK] The dollar weakened on Monday after disappointing China and US economic data added to worries about slowing global growth.

Sliding down from gains on Friday, the dollar traded at US$1.0893 per euro and 120.96 yen.

China set off new alarm bells over global growth. Official data showed Chinese manufacturing shrank at its fastest pace in more than three years in January, the sixth straight month of contraction in the world's number-two economy.

In the United States, consumer spending, the main driver of the US economy, was flat in December, the Commerce Department reported, and manufacturing contracted for the fourth straight month in January, according to the Institute for Supply Management's purchasing managers index.

"While these (US) reports only serve to solidify our view that the Fed will forgo raising interest rates in March, for the time being the focus is on easier monetary policies and weakness abroad," said Kathy Lien of BK Asset Management.

The Federal Reserve has indicated it would raise its benchmark interest rate by a quarter percentage point four times this year, but futures markets are pricing in only one or two hikes after January's financial market turbulence.

Federal Reserve Vice Chair Stanley Fischer, in a speech Monday, warned the market turmoil could hit the US economy.

"If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States," Mr Fischer said.

"Fischer subtly backed off his prior estimation that four rate hikes this year were in the ballpark," said Ryan Sweet of Moody's Analytics.

AFP