NEW YORK- The US dollar shrugged off weakness to edge higher against a basket of currencies on Friday, after data showed US business activity shrank for the first time in nearly two years in July as a services slowdown outweighed manufacturing growth.
S&P Global on Friday said its preliminary – or “flash” – US Composite PMI Output Index had tumbled far more than expected to 47.5 this month from a final reading of 52.3 in June.
With a reading below 50 indicating business activity had contracted, it is a development likely to feed into a vocal debate over whether the US economy is back in – or near – a recession after rebounding sharply from the downturn in early 2020 at the start of the COVID-19 pandemic.
The dollar found some support from safe-haven flows late on Friday, as investors’ appetite for riskier assets diminished with US indexes selling off on some weak earnings reports.
Against a basket of currencies, the dollar was 0.1 percent higher at 106.73. For the week the index was down 1.2 percent.
Friday’s dismal US data reflects a hit to sentiment, similar to that seen elsewhere around the globe, Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, said.
“That’s a reflection of tighter financial conditions and also the fact that inflationary pressures remain elevated,” Rai said.
Rai, however, said he wasn’t reading too much into the dollar’s weakness on Friday.
“Even if the US economy does slow down somewhat I don’t think you can extrapolate some sort of medium term dollar weakness … because we are seeing similar things elsewhere,” he said.
