2nd June 2023 – (New York) On Thursday, the U.S. dollar experienced significant losses as disappointing economic data in the United States reinforced the case for the Federal Reserve to hold rates steady at its upcoming meeting this month. The dollar index, which measures the greenback against six major peers, fell by 0.74 percent to 103.5585 in late trading.
According to data released by the Institute for Supply Management (ISM) on Thursday, the U.S. manufacturing purchasing managers index (PMI) in May fell to 46.9 from 47.1 in the previous month, hitting its lowest point since March and falling short of the forecast consensus of 47.0.
The ISM Prices Paid index, which came in at only 44.2, was significantly lower than market expectations of 52.0 and the previous reading of 53.2. This suggests a notable cooling of inflation in the manufacturing sector in May.
Investors’ risk appetite improved in general as the U.S. House of Representatives passed a bill to avoid debt default on Wednesday evening. However, the disappointing economic data had a significant impact on the dollar’s performance.
Furthermore, new jobless claims in the seven days ending May 27 rose by 2,000 from 230,000 the previous week, according to the U.S. Labor Department. While this is not indicative of major layoffs, it may influence the Federal Reserve’s decision-making at its upcoming meeting.
U.S. private payrolls data, which showed jobs increased more than expected, could result in the Fed keeping rates elevated for some time.
The Fed will meet in two weeks to decide whether it will raise interest rates again, and a June skip jumps to the fore following comments by Federal Reserve Governor Philip Jefferson and Philadelphia Federal Reserve President Patrick Harker on Wednesday.
On Thursday, the euro recovered from a two-month low after European Central Bank (ECB) President Christine Lagarde said further policy tightening was necessary. In late New York trading, the euro increased to 1.0761 dollars from 1.0673 dollars in the previous session. The British pound rose to 1.2526 dollars from 1.2417 U.S. dollars in the previous session.
In other trading, the U.S. dollar bought 138.8330 Japanese yen, lower than 139.3160 Japanese yen in the previous session. The U.S. dollar decreased to 0.9060 Swiss francs from 0.9115 Swiss francs and fell to 1.3447 Canadian dollars from 1.3576 Canadian dollars. The U.S. dollar was down to 10.8163 Swedish Krona from 10.8701 Swedish Krona.