Dollar little changed after ISM data, yen below 145 threshold

By Herbert Lash and Joice Alves

NEW YORK/LONDON (Reuters) -The dollar was little changed on Monday against a basket of major trading currencies and gained against a yen that’s under intervention watch after the Japanese finance minister warned last week of excessive moves in the currency market.

The dollar initially weakened on news of U.S. manufacturing slumping further in June to levels last seen when the economy was reeling from the initial wave of the COVID-19 pandemic.

The Institute for Supply Management (ISM) said its manufacturing PMI dropped to 46.0 from 46.9 in May, the lowest reading since May 2020. It marked the eighth straight month that the PMI has been below the 50 threshold indicating contraction.

“The key on the ISM was the prices paid, which was much weaker than expected,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “The ISM saw the dollar pare its earlier gains,” he said.

The ISM survey was consistent with an economy in recession as price pressures at the factory gate continued to deflate, suggesting U.S. inflation is coming under control.

But other data such as nonfarm payrolls, first-time applications for unemployment benefits and housing starts, suggest the U.S. economy continues to grow, a concern for those who see inflation again picking up at the end of summer.

“The bottom for this inflation process is going to be put in place next week, then we’re probably going to see prices go up,” said Ed Moya, senior market analyst at OANDA in New York, referring to the release of the consumer price index (CPI) on July 12.

“This market was so fixated that these pricing directions were going to be one-way, well it’s going to be in for a rude awakening.”

The yield on interest rate-sensitive two-year Treasuries at first fell on the news, before later heading higher, as did the dollar. The two-year hit an almost four-month high of 4.963%.

The ISM survey’s measure of prices paid by manufacturers fell to 41.8 in June from 44.2 the prior month as bottlenecks in the supply chain eased and higher borrowing costs dampened demand.

The dollar index, a measure of the U.S. currency against six other currencies, rose 0.039%.

The yen fell to near eight-month lows against the dollar as intervention came into sight after Finance Minister Shunichi Suzuki warned on Friday against investors selling the yen too far as it weakened past the threshold of 145 to the dollar.

Japan bought yen in September, its first foray in the market to boost its currency since 1998, after a Bank of Japan (BOJ) decision to maintain ultra-loose policy drove the yen as low as 145 per dollar.

It intervened again in October after the yen plunged to a 32-year low of 151.94.

The Japanese yen weakened 0.25% versus the greenback to 144.68 per dollar.

The euro rebounded after earlier weakening on data showing a slowdown in factory activity in China and the euro zone renewed concerns about economic growth.

Fears of a slowdown in the global economy have weighed on the euro after rising for three consecutive quarters.

A private sector survey on Monday showed China’s factory activity growth slowed in June, with sentiment waning and recruitment cooling as firms grew increasingly concerned about sluggish market conditions.

Euro zone manufacturing activity contracted faster than initially thought in June as persistent policy tightening by the European Central Bank squeezed finances.

The euro was last up 0.01% to $1.0911.

China’s onshore yuan was down slightly at 7.2419 after slipping to near eight-month lows against the dollar at the end of last week. [CNY/]

Currency bid prices at 2:25 p.m. (1825 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.9700 102.9500 +0.03% -0.502% +103.2700 +102.7400

Euro/Dollar $1.0912 $1.0909 +0.04% +1.84% +$1.0934 +$1.0870

Dollar/Yen 144.6700 144.3150 +0.26% +10.36% +144.9100 +144.0000

Euro/Yen 157.88 157.44 +0.28% +12.53% +157.9500 +157.2700

Dollar/Swiss 0.8963 0.8951 +0.16% -3.05% +0.9003 +0.8942

Sterling/Dollar $1.2686 $1.2692 -0.05% +4.90% +$1.2723 +$1.2660

Dollar/Canadian 1.3252 1.3250 +0.03% -2.18% +1.3273 +1.3231

Aussie/Dollar $0.6672 $0.6661 +0.17% -2.12% +$0.6692 +$0.6637

Euro/Swiss 0.9781 0.9767 +0.14% -1.15% +0.9805 +0.9762

Euro/Sterling 0.8599 0.8589 +0.12% -2.77% +0.8605 +0.8581

NZ $0.6149 $0.6137 +0.18% -3.17% +$0.6170 +$0.6125

Dollar/Dollar

Dollar/Norway 10.6940 10.7420 -0.46% +8.96% +10.7620 +10.6780

Euro/Norway 11.6724 11.7163 -0.37% +11.25% +11.7351 +11.6586

Dollar/Sweden 10.8295 10.7780 +0.51% +4.05% +10.8737 +10.7701

Euro/Sweden 11.8180 11.7576 +0.51% +5.99% +11.8411 +11.7573