US dollar at six-month high against the yen

London

THE US dollar scaled a six-month high versus the Japanese yen, and New Zealand's currency jumped to near four-month peaks on Monday after an unexpected rebound in Chinese manufacturing activity lifted hopes of a brighter outlook for world growth.

The euro was steady ahead of a testimony by the European Central Bank's new president, Christine Lagarde, to the European Parliament later in the day.

A tightening British election race knocked the pound lower.

Latest data out of China set the tone for currency markets. Chinese factory activity expanded at the quickest pace in almost three years in November, a private business survey showed on Monday, following upbeat official data over the weekend.

The survey also showed total new orders and factory production at buoyant levels.

"The fact that not only the Chinese PMI is better than expected but the underlying numbers are also encouraging, plays into the narrative of other forward-looking numbers we've seen globally," said Jeremy Stretch, head of G-10 FX strategy at CIBC Capital Markets.

"This gives reason for cautious optimism, even though we wait to see what happens on phase 1 of the US/China trade talks."

The US dollar rallied to 109.73 yen, the highest since May, and was last up a quarter of a per cent against the safe-haven Japanese currency at 109.63 yen.

Riskier currencies also rallied after the Chinese data, with the New Zealand dollar jumping to its highest in almost four months at US$0.6475. It was up 0.75 per cent on the day.

Analysts said the kiwi dollar was also buoyed by talk of fiscal stimulus to boost the New Zealand economy.

The New Zealand government plans a significant increase in infrastructure spending, making use of low borrowing costs to "build" the country, Finance Minister Grant Robertson said on Saturday.

Signs that the world economy, hit by a bitter US-China trade war, could be stabilising put the market spotlight on Monday's US economic data.

The Institute for Supply Management's (ISM) November manufacturing survey is due at 1500 GMT, followed later in the week by jobs data.

"The onus is now on the ISM data to see if there is a rebound, and the odds are on a bit of rebound but not a strong one," said Sebastien Galy, senior macro strategist at Nordea Asset Management.

The euro was steady at US$1.1015 before Ms Lagarde's testimony to the European parliament later in the day. She took over at the ECB last month, and investors want a sense of the direction that central bank policy will take under its new president.

Elsewhere, the sterling was down a third of a percentage point at US$1.29 as polls pointed to a narrowing lead for the governing Conservative Party before the United Kingdom's Dec 12 election. REUTERS