Dollar Weakens Amid Manufacturing Concerns
The dollar continued to feel pressure on Tuesday following disappointing manufacturing activity data from the U.S., which has increased expectations for the Federal Reserve to lower interest rates during its upcoming policy meeting.
The US dollar index, which gauges the currency’s strength against a selection of six major currencies, declined for the seventh consecutive day. This drop, reaching a two-week low during U.S. trading on Monday, saw the dollar modestly settling at $99.408 as Asian markets opened.
Recent figures indicated that U.S. manufacturing has contracted for nine months in a row, with the Institute for Supply Management reporting a decrease in the manufacturing PMI from 48.7 in October to 48.2 in November. In addition, indicators for new orders and employment have shown a downturn, while input prices have risen due to ongoing import tariffs.
“This suggests a slowdown in economic demand,” noted Brian Martin, who leads G3 economics at ANZ in London. He further expressed his belief that the Fed should not only reduce rates this December but likely again in the following year, predicting an additional 50 basis point cut in 2026.
According to the CME Group’s FedWatch tool, there is currently an 88% implied likelihood of a 25 basis point rate cut at the Federal Reserve’s next meeting scheduled for December 10, a significant increase from a 63% chance noted a month prior.
The yield on the US 10-year Treasury note rose to 4.086% following declines in global bond markets on Monday.
Conversely, against the yen, the dollar was valued at 155.51 yen. Japan’s two-year government bond yield reached above 1% for the first time since 2008, prompted by remarks from Bank of Japan Governor Kazuo Ueda, who mentioned he would weigh the “pros and cons” of raising interest rates in the upcoming policy meeting.
The euro stood at $1.1610. In Asia, it has remained stable with ongoing discussions regarding the resolution of the conflict in Ukraine. There is a unified support amongst European leaders for Ukrainian President Volodymyr Zelenskiy following a U.S.-backed peace proposal that appears to favor Russia. Meanwhile, a U.S. envoy is headed to Moscow for further negotiations.
The British pound traded at $1.3216, nearing a one-month high, yet there was little movement observed throughout the day. The resignation of the head of Britain’s fiscal watchdog occurred after Chancellor of the Exchequer Rachel Reeves mistakenly revealed crucial details of the government’s budget prior to its formal presentation in Parliament.
The Australian dollar was at $0.6544, and likewise, the Kiwi dollar was priced at $0.5727, with both currencies experiencing minimal fluctuations as the Asian trading session began.
