Dollar beats euro for first week since mid-June after bullish data

New York

THE US dollar on Friday gained against the euro for the first week since mid-June after data showed a strong uptick in US business activity, while the single currency was held down as an August batch of European business surveys pointed to a stuttering economic recovery.

US business activity snapped back to the highest since early 2019 this month as companies in both the manufacturing and services sectors saw a resurgence in new orders even as new Covid-19 cases remain stubbornly high across the country.

"The Markit PMI flash readings show the US is outperforming Europe," said Edward Moya, senior market analyst at OANDA in New York.

The data contrasted with weakness in the eurozone, as the pent-up demand unleashed last month by the easing of Covid-19 lockdowns dwindled. "Clearly the PMI numbers suggest that Europe is losing a little momentum here and that we're seeing some turbulence in other areas of the global economy. So that is weighing on the performance gap between the US and its major counterparts," said Karl Schamotta, chief market strategist at Cambridge Global Payments.

The euro dipped to a one-week low of US$1.175 against the greenback earlier, before rising back to US$1.179, down 0.61 per cent on the day.

The greenback escaped a ninth consecutive weekly decline that would mark the longest losing streak since the summer of 2010 and a run that has only happened five times since 1990. The recovery in the dollar began on Wednesday after the Federal Open Market Committee released minutes from its last meeting, the tone of which was more dovish than expected. The minutes prompted dollar bears to buy into the heavily shorted currency, fuelling its biggest one-day surge in more than two months.

Bears have reaped rich returns from shorting the greenback in recent weeks as the US has struggled to tame the Covid-19 pandemic and the unprecedented policy stimulus unleashed by the Fed had darkened the outlook for the safe-haven dollar.

The dollar index against a basket of major currencies was last up 0.60 per cent at 93.24. REUTERS