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Trading on Monday saw the euro rise against the dollar. Manufacturing data released from the Eurozone showed a far less grim picture than investors had previously expected. After three-weeks of lows, Europe’s currency has managed to make small gains.
Not all of the news out of Europe was positive during the day. In France, the manufacturing sector dropped significantly during the month of September. Investors are also still concerned about the possibility of Spain receiving a credit rating downgrade. Luckily, the negatives were surprisingly out balanced by growth in Europe. The Purchasing Manager’s Index showed a gain of 47.4 for Germany. This rise marks Germany’s highest PMI since March.
Adding to the optimism were better-than-expected PMIs for Spain and Italy. The current financial situation in the United States has also provided a boost to Europe’s currency. Investors are wary about purchasing weak American dollars and instead of sought other currencies. After the PMIs and manufacturing data were released, the euro gained 0.5 percent to $1.2925. During the Asian trading session, the euro had dropped to a three-week low of $1.2802 until it was bolstered by positive reports.
Dollar Rises Against the Yen
Presently, the greenback is trading 0.1 percent higher against the Japanese yen. At a rate of 77.96 yen, the United States dollar is slightly higher than the two-week low it reached on Friday. Comparably, the euro gained 0.5 percent versus Japan’s currency to reach 100.45 yen.
On Monday, the sterling dropped to a one-week low versus the euro. British manufacturing sank during the month of September to 48.4. The 50 mark is seen as pivotal for an economy since it marks manufacturing contraction and expansion. Although economists believe the United Kingdom is leaving the recession, weak economic data indicates that progress may be rocky. The euro gained 0.5 percent against the pound to 79.93.
Versus the greenback, the sterling also rose from a two and a half week low to reach $1.6170. Earlier in the day, the sterling had hovered around a low of $1.6109. More gains may be made one the next policy decision is released by the Bank of England. Most analysts believe that rates will remain at their current level of 0.5 percent.
Fears about Spain’s Credit Rating
Investors around the world are waiting for the results of Moody’s review of Spanish debt. After a tumultuous year, a further downgrading would place Spain’s sovereign debt into the junk status territory. If this happens to Europe’s fourth largest economy, it could heighten investors’ fears about an international bailout and lead to massive selling of the euro.