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US dollar dented as Feb PMI disappoints

New York 

THE US dollar fell across the board on Friday after a survey of purchasing managers showed US business activity in the manufacturing and services sectors stalled in February and as investors fretted over the fast-spreading Covid-19 disease.

The IHS Markit flash services sector Purchasing Managers' Index dropped to 49.4 this month, the lowest since October 2013 and signalling that a sector accounting for roughly two-thirds of the US economy was in contraction for the first time since 2016. Economists polled by Reuters had forecast a reading of 53.

Against a basket of six other currencies, the US dollar was down 0.59 per cent. The euro was 0.68 per cent higher against the greenback. Business activity in the eurozone picked up more than expected this month, a business survey showed on Friday, in welcome news for policymakers at the European Central Bank, who are trying to revive growth and chronically low inflation.

The dollar's broad weakness and increased demand for safe havens had helped the yen pull back from a 10-month low hit in the previous session. The yen, which lost 2 per cent against the dollar in the previous two days amid worries about the health of the Japanese economy, was up 0.5 per cent against the greenback on Friday.

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Covid-19 infection cases in South Korea and Japan, coupled with last week's dismal economic news out of Japan that stirred talk that the country is already in recession, pressured the Japanese currency.

"Fundamentally, the case is clearly a bearish one for the yen, though the dynamics underpinning the currency as a safe haven should keep the Japanese currency on the list of outperforming currencies," Jonathan Coughtrey, managing director at Action Economics, said in a note.

The yen typically rises during geopolitical or financial stress as Japan is the world's biggest creditor nation.

The Australian dollar recovered ground to trade up 0.2 per cent against its US counterpart after slipping to an 11-year low on Friday.

The impact of the Covid-19 epidemic in China, the biggest export market for Australia, has pressured the Aussie in recent sessions.

The New Zealand dollar was up 0.41 per cent, pulling back from a more than three-month low hit on Thursday.

Sterling rose against the dollar after British factories reported the fastest rise in output for 10 months in February, assuaging some fears over the economy as Britain prepares for trade talks with the European Union. The pound was up 0.72 per cent against the greenback. REUTERS

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