The British pound gained against the dollar

The US dollar fell against most major currencies with the exception of the Japanese yen after upbeat data from China and Australia boosted risk appetite. China’s manufacturing sector had a moderate rebound in August after slowing for several months which helped soothe worries over the health of the global economy. However, market sentiment was slightly dented after the US private sector unexpectedly cut jobs in August delivering yet another blow to the already faltering economic recovery. A report from ADP Employer Services showed the private sector cut 10,000 jobs in August compared to a revised gain of 37,000 in July. On the up side, the Institute for Supply Management reported its index of national factory activity rose to 56.3 in August up from 55.5 in July.

The euro gained 1 % on the dollar after upbeat data from China and Australia which brought risk appetite to the forefront of many investors. On the economic data front, the Markit Eurozone Manufacturing Purchasing Managers’ Index rose to 55.1 in August. This was the slowest pace of expansion in the euro zone since February.

The British pound gained against the dollar, but weakened to a three-week low vs. the euro after a weaker than expected UK purchasing managers’ survey. The Markit/Chartered Institute of Purchasing and Supply Manufacturing PMI fell to 54.3 in August, the lowest level since November last year.

The Japanese yen slipped after stronger ISM data from the US. Comments from Japanese ruling party powerbroker Ichiro Ozawa, challenging Prime Minister Naoto Kan in a party leadership vote, said he would implement steps, including intervention if the yen rose sharply.

The Canadian dollar recouped some of its recent losses as strong overseas data revived risk appetite. With no more domestic economic data due this week, external data may weigh on the loonie and the Bank of Canada’s decision to raise rates at next week’s meeting.

The Australian and New Zealand dollars strengthened after strong economic data from Australia. The Aussie rose nearly 2% against the greenback after Australian government data showed gross domestic product climbed 1.2% in the second quarter. This growth was the fastest pace in three years.