Investing.com - The dollar rose to fresh seven year highs against the yen on Monday after ratings agency Moody’s downgraded Japan's sovereign debt rating, while the euro edged higher, shrugging off weak factory data.
USD/JPY hit highs of 119.14, the most since August 2007, before falling back to 118.41, off 0.15% for the day.
The drop in the yen came after Moody’s downgraded Japan's sovereign debt rating by one notch to A1, citing “heightened uncertainty” over Japan’s ability to cut its fiscal deficit following a decision by Prime Minister Shinzo Abe to delay a planned sales tax hike.
"Fiscal consolidation will become increasingly difficult to achieve as time passes given rising government spending, particularly for social programs associated with a rapidly ageing population," the rating agency said.
EUR/USD was up 0.13% to 1.2468, off overnight lows of 1.2418.
Data on Monday showed that the euro zone’s manufacturing purchasing managers’ index slowed to 50.1 from a preliminary reading of 50.4 last month, just barely above the 50 level separating growth from contraction.
Germany’s manufacturing PMI entered contraction territory for the first time in 17 months, falling to 49.5, as new orders fell at the fastest rate in nearly two years.
The French manufacturing PMI remained in contraction territory at 48.4, while Italy’s factory PMI came in at 49.0.
The pound rose to session highs after data showed that U.K. manufacturing activity rose to a four month high in November, easing concerns that the economic recovery is slowing.
GBP/USD was up 0.51% to 1.5719 from around 1.5678 ahead of the release of the data.
The U.K. manufacturing PMI ticked up to 53.5 last month from 53.2 in October. Economists had expected the index to edge down to 53.1.
The dollar was little changed against the Swiss franc, with USD/CHF at 0.9644.
The Australian dollar touched four year lows overnight, and AUD/USD was last down 0.18% to 0.8484 after official data showed that China’s manufacturing sector expanded at the slowest pace in eight months in November.
A broad based selloff in commodities, which saw oil fall below $70 a barrel also weighed.
Meanwhile, NZD/USD eased up 0.10% to 0.7846 and USD/CAD was steady at 1.1410.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was down 0.31% to 88.14, pulling back from last week’s more than four-year highs of 88.52.