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    European Session – Dollar fluctuates around 120 yen, weighed by disappointing ISM Manufacturing data

    The euro rose to the 1.13 handle before falling back to 1.1232. Eurozone unemployment data helped support the single currency after a surprise drop to 10.9% in August from 11.1% in July, the lowest level since early 2012. Eurozone final manufacturing PMI for August missed expectations but not by much and came in at 52.3 versus the flash reading of 52.4.

    Sterling rose early to a session high of 1.5406 before tumbling on weak UK data which showed activity in the manufacturing sector remained sluggish in August. The headline manufacturing PMI index fell to 51.5 in August from 51.9 in July, compared with expectations for slight increase to 52.0. The pound fell after the data to reach as low as 1.5303.

    The broad risk off tone today helped buoy the safe haven yen, pushing the dollar below the key 120.00 yen level several times. Concerns about China after weak PMI data today were not good for overall risk sentiment. A low of 119.52 yen was touched and the pair was capped at 120.25 yen.

    Meanwhile, disappointing ISM manufacturing PMI pushed the dollar back below the 120.00 level. The index fell to 51.1 in august, the lowest since May 2013 and missed expectations for a reading of 52.6. It was also below the prior 52.7 figure. Many of the components of the ISM survey also missed forecasts and were below prior readings, including prices paid which fell to 39.00 from 44.0 and new orders dropped to 51.7 from 56.5. Also, the ISM employment index was down to 51.2 from 52.7. The next risk event for the dollar comes on Thursday with the ADP private payrolls data and then the all-important non-farm payrolls report on Friday. These data points will be closely watched by the Fed when making monetary policy decisions.

    Canadian GDP data contracted at an annualized 0.5% rate in the second quarter. While this was better than
    economists’ forecast for a decline of 1.0%, a revision showed the first quarter’s contraction was 0.8%, steeper than initially estimated. This means that the Canadian economy entered a recession after two consecutive quarters of contraction. The greenback dropped against the Canadian loonie after the data to a low of 1.3116.

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