US dollar weakens on service sector slowdown

[NEW YORK] The US dollar weakened on Tuesday after data showed activity in the US service sector slowed sharply last month, diminishing the odds of an early rate hike by the Federal Reserve.

The Institute for Supply Management reported on Tuesday that its purchasing managers index for the supply sector had fallen from a reading of 55.5 to 51.4 for August. A result above 50 represents growth.

The toward 2100 GMT, the euro was at US$1.1257, up from US$1.1148 the day before, while the dollar dropped to 101.99 yen, from 103.43. The pound stood at US$1.3442, up from US$1.3304 on Monday.

The euro meanwhile lost territory to the pound and the yen, falling slightly to 83.75 pence, down from 83.79, and buying 114.81 yen, down from 115.30.

The drop in US service sector activity could argue against predictions of an interest rate hike this month by the US Federal Reserve.

It was yet another contradictory indication in the complex picture of the US economy considered by policymakers in Washington. Official figures released Friday showed the US had added 155,000 jobs in August, still solid but below analyst expectations.

Jasper Lawler, an analyst at CMC Markets, said he believed the sharp service sector slowdown meant the Fed would be in error if it raised rates this month.

AFP