Dollar climbs ahead of US ISM manufacturing

The U.S. dollar traded higher versus majors on Tuesday ahead of a report which may signal U.S. manufacturing sector held near the strongest since April 2011.

Today’s report will probably show that ISM manufacturing inched down to 57.0 in August from 57.1 in July.  

The most recent data has suggested that recovery in the world’s biggest economy is moving on the right track, thereby helping the dollar to continue its rally this week.

However, all eyes will focus on the awaited nonfarm payrolls on Friday, as investors know that it is the key determinant to any change in the Fed’s monetary policy.

The dollar index, which tracks the dollar’s movement versus a basket of major currencies climbed to a set a new high of 83.01.

The USDJPY leaped to resume its advance for a third straight session to trade around 104.95, compared with session’s opening of 104.33.

The EURUSD dipped to trade near its lowest level in almost a year, recording a low of 1.3108.

The European common currency may remain under pressure until Thursday, the time at which the ECB will announce its monetary decision.

Markets are waiting for a new stimulus to bolster the anemic recovery and stave off low inflation.

The ECB will also give an update to its quarterly inflation and growth forecasts.

A report released yesterday showed an ease in the pace of expansion in the euro area’s manufacturing sector in August.

The GBPUSD dropped sharply, erasing the gains recorded over the previous four sessions, to hit a new low of 1.6516.

UK PMI manufacturing released on Monday signaled a retreat in the gauge in August by more than analysts’ forecasts.

The pound continued its bearish direction as the BOE refrained from announcing when it would raise interest rates.