FOREX-Dollar nurses wounds as factory data sparks economy concern

Reuters

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    * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
    * Weak data stuns dollar bulls into selling
    * Worries about trade friction hurt sentiment
    * Trade war extends to Argentina, Brazil

    By Stanley White
    TOKYO, Dec 3 (Reuters) - The dollar traded near a one-week
low versus the yen on Tuesday and near the lowest in almost two
weeks against the euro, on concern about weak U.S. manufacturing
data and signs of new fronts in the U.S. trade war.
    Sentiment also took a hit after U.S. President Donald Trump
announced tariffs on metal imports from Brazil and Argentina.
 urn:newsml:reuters.com:*:nL8N28C2M8
    Recent U.S. economic data had shown signs of improvement, so
a fourth consecutive month of shrinking manufacturing activity
as well as an unexpected decline in construction spending put a
big dent in hopes that the world's largest economy had
stabilised.
    Investors are also worried about how the United States will
scale back a 16 month-long trade war with China, while more
tariffs on other countries' goods would pose an additional risk
to the global economic outlook.
    "The weak data forced a lot of people to give up dollar
longs and cut losses," said Daiwa Securities' foreign exchange
strategist Yukio Ishizuki in Tokyo.
    "This may have run its course, but there's no reason to
chase the dollar's upside from here. Trade friction remains a
lingering threat, which is not good for market sentiment."
    The dollar traded at 109.00 yen  JPY=EBS  on Tuesday in
Asia, close to its lowest in a week. It was quoted at $1.1076
versus the euro  EUR=EBS  after falling 0.56% on Monday, its
biggest decline against the single currency since Sept. 17.
    Against a basket of six major currencies, the dollar index
 .DXY  stood at 97.887, having fallen on Monday by the most in
six weeks.
    On Monday, the U.S. Institute for Supply Management said its
index of national factory activity fell 0.2 point to 48.1 in
November. A reading below 50 indicates contraction. Economists
polled by Reuters had forecast a rise to 49.2 from 48.3 a month
prior.  urn:newsml:reuters.com:*:nL1N2890MD
    Separate data showed construction spending fell in October
as investment in private projects tumbled to the lowest level in
three years.  urn:newsml:reuters.com:*:nLNS2NEFEC
    The data surprised economists who had recently raised U.S.
growth forecasts for the forth quarter due to positive data on
trade, housing and manufacturing.
    Meanwhile, Trump surprised policymakers in Brazil and
Argentina with tariffs on steel and aluminium imports.
    In a Monday tweet, Trump said the tariffs, "effective
immediately", were necessary because "Brazil and Argentina have
been presiding over a massive devaluation of their currencies,
which is not good for our farmers."
    The comment came despite both countries actively trying to
strengthen their currencies against the dollar.
    The Brazilian real  BRL=  rose 0.3% to 4.2230 on Monday
after Brazil's central bank conducted a spot auction to support
the currency. The Argentine peso  ARS=  was largely unchanged at
59.88.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Trump, citing U.S. farmers, slaps metal tariffs on Brazil,
Argentina     urn:newsml:reuters.com:*:nL8N28C2M8
U.S. manufacturing contracts further, tempers economic growth
hopes     urn:newsml:reuters.com:*:nL1N2890MD
U.S. construction spending unexpectedly falls in October     urn:newsml:reuters.com:*:nLNS2NEFEC
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Stanley White; Editing by Christopher Cushing)
 ((stanley.white@tr.com; +81 (0)3 4563 2799;
twitter.com/stanleywhite1 ;))

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