Dollar higher vs. yen, PMI data supports euro

The dollar was higher against the yen on Wednesday after weak Chinese manufacturing data for July, while the euro was trading close to six-week highs following encouraging euro zone data.

During European late morning trade, the dollar rose to session highs against the yen, with USD/JPY advancing 0.66% to 100.10.

The preliminary reading of China’s HSBC manufacturing purchasing managers’ index fell to 47.7 in July, from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6.

The dollar regained ground against the yen, after falling to almost one-week lows on Tuesday as recent weaker U.S. data dampened expectations that the Federal Reserve will scale back its easing program later this year.

Data released on Wednesday showed that Japan posted a trade deficit of JPY180.8 billion in July as the weaker yen pushed import costs higher. Imports were up 11.8% from a year earlier, while exports climbed 7.8% on a year-over-year basis.

The dollar was steady close to six-week lows against the euro, withEUR/USD edging up 0.08% to 1.3235.

The euro was boosted after data showed that the euro zone composite PMI output index rose to 50.4 in the current month from 48.7 in June, on the back of stronger data from Germany and France. 

The data fuelled optimism that the bloc’s economy could emerge from a recession in the third quarter.

Germany’s manufacturing PMI rose to 50.3 from June's reading of 48.6, and the service sector PMI jumped to 52.5, from 50.4.

The French manufacturing PMI ticked up to a 17-month high of 49.8 from 48.4 in June, while France’s services PMI improved to 48.2 from 47.2 last month.

Elsewhere, the dollar pushed higher against the pound and the Swiss franc, with GBP/USD slipping 0.13% to 1.5345 and USD/CHF rising 0.10% to 0.9357. 

The greenback was broadly higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD dropping 0.91% to 0.9210,NZD/USD down 0.44% to 0.7960 and USD/CAD edging up 0.05% to 1.0293.

The Australian and New Zealand dollars were hit by concerns over a slowdown in demand from trading partner China. 

In Australia, official data showed that consumer price inflation remained unchanged at 0.4% in the second quarter, compared to expectations for an uptick to 0.5%, dampening expectations for another rate cut by the central bank in August.

Meanwhile, data on showed that New Zealand’s trade surplus widened unexpectedly in June, increasing to NZD414 million, from a surplus of NZD71 million the previous month. 

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.11% to 82.17. 

Investors were looking ahead to U.S. data on new home sales later in the trading day.