Dollar Gains on Positive Manufacturing Data

By Ira Iosebashvili
DJ- The dollar rose Tuesday, as better-than-expected U.S. manufacturing data
reassured investors about the state of the economy and increased chances that
the Federal Reserve will raise interest rates this year.

The dollar was recently up 0.6% at Yen113.39. The euro was recently down
0.2% to $$1.0856. The Wall Street Journal Dollar Index, which measures the buck
against a basket of 16 currencies, was recently up 0.1% at 90.04.

While U.S. factory activity slowed in February, the pace of the decline
was less severe than it had been in recent months, data from the Institute for
Supply Management showed Tuesday. The numbers come on the heels of a string of
weaker-than-expected manufacturing reports, which led investors to wonder
whether the U.S. economy was strong enough for the Fed to raise rates this
year. Lower rates for longer weigh on the dollar, as they make the currency
less attractive to yield-seeking investors.

“Things now appear to be headed in the right direction for the U.S.
economy,” said Joe Manimbo, senior market analyst at Western Union. “This helps
re-establish a pillar under the dollar.”

Fed-funds futures, used by investors and traders to place bets on U.S.
central-bank policy, on Tuesday showed that 53% of investors believe the Fed
will raise rates in December 2016, according to data from CME Group. The
probability was only 12% one month ago.

At the same time, emerging market currencies rose against the dollar,
boosted by higher oil prices earlier in the day and Monday’s announcement of
fresh economic stimulus measures from China. The buck was recently down 0.9%
against the Russian ruble to 74.19, its lowest level since Jan. 8. It was off
0.7% against the Mexican peso, to 18.01, and lost 0.8% against the South
African rand, to 15.74.

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com