TOKYO- The US dollar lost some support from a slide in Treasury yields overnight after local economic data showed a slowdown in manufacturing, hinting that aggressive Federal Reserve rate hikes are already being felt.
The dollar index, which measures the currency against six peers including sterling and the euro, was about flat at 111.55, not far from Monday’s low of 111.46, a level last seen on Sept. 23. It had soared to a two-decade high of 114.78 last Wednesday.
On Monday, the Institute for Supply Management’s (ISM) survey showed US manufacturing activity was the slowest in nearly 2-1/2 years in September as new orders contracted, with a measure of inflation at the factory gate decelerating for a sixth consecutive month.
Australia’s dollar tumbled on Tuesday after the nation’s central bank surprised markets by opting to raise rates by a smaller-than-expected quarter point.
The Reserve Bank of Australia said it decided to slow the pace of tightening because the cash rate had been increased substantially in a short period of time, but left the door open to additional hikes.
The Aussie slumped as much as 0.97 percent before last trading 0.47 percent weaker at $0.6484.
“Obviously the RBA hasn’t been persuaded by what other central banks are doing, which does make the comment that they don’t have any concerns about the exchange rate down here,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
Heading into the RBA’s decision, the currency had been tracking a little below the top end of its range since Sept. 23 at $0.6537. It sank to a 2-1/2-year low of $0.63635 last week.