When PMI Euro Zone Weakens, US Dollars Strengthen

US dollar banknotes (ANTARA/REUTERS)

JAKARTA - The US dollar strengthened against a basket of other major currencies at the end of trading Friday (Saturday morning WIB), after the initiating buyer manager index (PMI) of the euro zone significantly missed expectations and data on gloomy business activities from around the world exacerbated risk sentiment.

The dollar index, which measures the greenback against six major rival currencies, rose 0.51 percent to 102.9080 at the end of trading.

The PMI euro zone fell to 50.3 in June from 52.8 in the previous month, which was below analyst expectations of 52.5, according to data released on Friday, June 23. The figure above 50 marks an increase in activity, while the figure below 50 marks a contraction.

The growth in euro zone business production almost stalled in June, according to latest PMI flash survey data released by S&P Global. Recent data show a new weakening in the economy following a brief growth revival recorded in the spring, S&P Global said in its release.

PMI US flash services fell to 54.1 in June from 54.9 in the previous month, according to data released by S&P Global on Friday. Meanwhile, the market estimated consensus is at 54.0 for June.

As the second fastest reading since April 2022, PMI's US flash services for June showed further solid expansion in output in service-service companies, according to S&P Global.

However, the overall picture shows US economic growth is increasing in the second quarter even as concerns continue that the Federal Reserve's aggressive interest rate hike over the past year will trigger a recession.

"We are starting to see signals from the business that demand is starting to decrease on margins and that leads to a re-calibration of what future outputs will look like," said Bipan Rai, head of North American foreign exchange strategy at CIBC Capital Markets.

"I think that concerns with future prospects are weighing on current risk tastes and the dollar is somewhat reducing that offer," Rai was quoted as saying by ANTARA.

At the end of New York trading, the euro fell to $1.0891 from $1.0959 in the previous session, and the English pound fell to $1.2707 from $1.2745 in the previous session.

The US dollar was purchased at 143.7940 Japanese yen, higher than 143.0390 Japanese yen in the previous session. The US dollar rose to 0.8912 Swiss francs from 0.8961 Swiss francs, and rose to 1.3188 Canadian dollars from 1.3145 Canadian dollars. The US dollar rose to 10.7255 Swedish krona from 10.6893 Swedish krona.