Investing.com - The dollar hit two-month lows against the yen on Monday as worries over turmoil in emerging markets underpinned safe haven demand, while the euro was trading close to ten-week lows against the greenback.
EUR/USD inched up 0.03% to 1.3493, after falling to lows of 1.3478 on Friday, the weakest since November 22.
The euro rose to session highs of 1.3568 earlier after data showed that the euro zone’s manufacturing sector continued to recover in January.
The euro zone’s manufacturing purchasing managers’ index rose to a 32-month high of 54.0 in January, up from 52.7 in December and a shade higher than the preliminary estimate of 53.9.
All of the euro zone’s peripheral countries reported an increase in manufacturing activity in January, with Greece returning to growth for the first time since August 2009.
However, sentiment on the common currency remained fragile after data last week showing that inflation in the euro zone slowed in January fuelled fears that the European Central Bank may tighten policy to stave off the risk of deflation.
Elsewhere, USD/JPY slipped 0.06% to 101.95, after falling as low as 101.68 earlier.
Demand for the safety of the yen continued to be underpinned by fears over a crisis in emerging markets and concerns over a possible slowdown in China.
Official data released over the weekend showed that China’s manufacturing purchasing managers’ index ticked down to a five month low of 50.5 in January from 51.0 the previous month, in line with market expectations.
A separate report on Monday showed that China’s official services PMI slowed to 53.4 month, from 54.6 in December.
Emerging markets have been hard hit in recent sessions by concerns over the impact of reductions in Federal Reserve stimulus and fears over slowing growth China.
Rate hikes by central banks in India, Turkey and South Africa last week did little to shore up their currencies, while the Hungarian florint was trading close to two-year lows against the dollar on Monday, amid speculation that Hungary’s central bank will soon need to hike rates.
Elsewhere, the pound was trading at two-week lows against the dollar, with GBP/USD falling 0.55% to 1.6345. The drop in sterling came after data showed that the U.K. manufacturing sector expanded at the slowest rate in three months in January.
The U.K. manufacturing PMI came in at 56.7 for January, down from 57.2 in December and below estimates for a reading of 57.0.
Although the rate of the expansion was the slowest in three months the index was still well above the series average of 51.3, indicating that the economy had a strong start to the year.
The dollar slipped against the Swiss franc, with USD/CHF losing 0.13% to trade at 0.9052.
The New Zealand dollar pushed higher, with NZD/USD up 0.26% to 0.8108.
The Australian dollar also moved higher, with AUD/USD up 0.50% to 0.8795 ahead of the Reserve Bank of Australia’s rate review on Tuesday, amid expectations that it would keep interest rates on hold.
The RBA was expected to shift its stance away from lower rates after recent economic data indicated a pickup in consumer spending and business conditions and continued strengthening in the housing market.
The Canadian dollar extended its pullback from last week’s four-and-a-half-year lows against the U.S. dollar, with USD/CAD down 0.47% to 1.1074.
The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.15% to 81.24.