Dollar Weakens After Sluggish Data

        By James Ramage
        The dollar fell against the euro and currencies linked to commodity-based economies on Monday after U.S. manufacturing growth was softer than expected last month and oil prices rose.
        The euro increased 0.5% to $1.1339, lingering above an 11-year low against the dollar. In addition, the U.S. dollar lost about 1% of its value against the Canadian dollar and the Norwegian krone, the currencies of two countries that derive significant income from crude oil, to C$1.2569 and 7.6508 kroner. The New Zealand dollar gained 0.6% to US$0.7302.
        The Institute for Supply Management's manufacturing purchasing managers index fell to 53.5 in January from 55.1 in December, its lowest reading in a year. While the gauge of U.S. manufacturing remained above 50, signifying expansion, economists had predicted the PMI would show only a 0.8-point decline from the previous month.
        The data, following a Friday report that revealed U.S. economic growth slowed to 2.6% in the fourth quarter, weighed on the dollar as it added to concerns that the world's largest economy may be pulling back.
        "The fact that the components (of the PMI) are broad based, that may have disappointed investors to some extent," said Aroop Chatterjee, chief currency quantitative strategist at Barclays. "There were declines on orders, and employment conditions aren't expanding as fast as in past months."
        Still, the manufacturing data are unlikely to persuade the Federal Reserve to delay raising interest rates this year. The underlying growth trajectory for the U.S. remains strong, Mr. Chatterjee said.
        "Manufacturing is a small part of the economy," Mr. Chatterjee said. "It's important for a guide. But services and consumer confidence tend to matter more, as the U.S. is a highly service-driven economy."
        The manufacturing data also sent the dollar lower against commodity-based currencies, adding to losses as oil prices rose on the day. Brent crude for March delivery, the global benchmark, ended Monday at a one-month high of $54.75 a barrel on the ICE Futures Europe exchange.
        Oil's rally stemmed a months-long slide and encouraged some traders to take profits on bets against the Canadian dollar, the Norwegian krone and other commodity-influenced currencies.
        In other trade, the dollar rose 0.1% to 117.62 yen. Looking ahead, the market will be watching the U.S. employment report for January, due Friday, for clues about when the Federal Reserve might raise interest rates.
        Higher interest rates in the U.S. would make the dollar more attractive against rivals as it would boost returns on assets denominated in the currency.
        Write to James Ramage at james.ramage@wsj.com
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        February 02, 2015 17:31 ET (22:31 GMT)

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