Dollar hits 6-week high on strong ISM data

Dollar hits 6-week high on strong ISM data

The dollar hit a six-week high against a basket of major currencies on Tuesday as strong U.S. manufacturing data supported expectations that the Federal Reserve in a few weeks may start reeling in its stimulus.

Data from an industry group showed the U.S. manufacturing sector grew at its fastest pace in more than two years in August, bolstering expectations for faster overall growth in the second half of the year.

The dollar, which hit more than one-month highs against the euro and the yen, was also favored for its status as a safe-haven amid ongoing uncertainty on whether the United States will conduct a military strike against Syria.

U.S. President Barack Obama opted to seek congressional authorization for military action against Syria, a move that was likely to delay any strike for at least several days.

The yen, another traditionally safe-haven currency, briefly rose on a media report that Russian radar detected two ballistic “objects” that were fired toward the eastern Mediterranean, but it gave up those gains after Israel’s defense minister said that Israel had tested a U.S.-backed missile system in the Mediterranean.

The dollar index, which measures the greenback against a basket of six major currencies, hit a high of 82.505, its highest since July 22. It last traded at 82.458, up 0.5 percent.

The dollar was also helped by a spike in Treasury yields, which move inversely to price, as the data reinforced beliefs that the Fed will start withdrawing stimulus, especially if the U.S. jobs market shows more signs of improvement.

The Fed’s next policy meeting is on Sept. 17-18, which will be after the release this Friday of payrolls data for August.

The interest rate-sensitive 2-year Treasury note yield hovered near its highest since July 2011.

Against the yen, the dollar rose as high as 99.86 yen, not far from its Aug. 2 peak of 99.94 yen. It last traded up 0.5 percent at 99.78 yen, off a low of 99.14 yen struck after the reports from the Mediterranean.

The euro fell against the dollar, weighed by expectations that the European Central Bank this week will reiterate its pledge to keep interest rates low to support a nascent recovery.

The euro fell to $ 1.3137, its lowest level since July 22, and was last trading 0.3 percent lower at $ 1.3148, according to Reuters data.

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