Investing.com - The dollar rose to fresh four-year highs against a basket of other major currencies on Monday, as the release of strong U.S. manufacturing data added to optimism over the strength of the U.S. economic recovery.
The dollar strengthened further after the Insitute of Supply Management said its manufacturing purchasing managers' index rose to 59.0 this month from 56.6 in September. Analysts had expected the index to decline to 56.2 in October.
The data came after the University of Michigan reported on Friday that its consumer sentiment index rose to a seven-year high of 86.9 this month from 86.4 in September.
The yen tumbled to fresh seven-year lows against the dollar, with USD/JPY up 1.42% at 113.91 as the Bank of Japan's surprise decision on Friday to introduce further easing measures continued to weigh.
The yen came under broad selling pressure after the BOJ said it would raise its monetary base target to an annual increase of ¥80 trillion from ¥60-70 trillion yen in order to increase the chances of approaching its inflation goal.
EUR/USD slid 0.29% to 1.2489, the lowest level since August 2012.
The single currency came under pressure after Markit research group said that the German manufacturing PMI fell to 51.4 in October from a reading of 51.8 the previous month, confounding expectations for the index to remain unchanged.
Markit's manufacturing PMI for the entire euro zone ticked down to 50.6 this month from 50.7 in September. Analysts had expected the index to remain unchanged.
The pound was steady, with GBP/USD at 1.5991 and the Swiss franc edged lower, with USD/CHF rising 0.32% to 0.9656.
Markit said the U.K. manufacturing PMI rose to 53.2 this month from 51.6 in September. Analysts had expected the index to slip to 51.2 in October.
Elsewhere, the commodity linked dollars were broadly weaker, with AUD/USD tumbling 1.07% to 0.8703 and NZD/USD retreating 0.85% to 0.7726, while USD/CAD climbed 0.48% to 1.1320.
The Aussie weakened after official data earlier showed that building approvals in Australia dropped 11.0% in September, compared to expectations for a 0.9% decline. August's figure was revised to a 3.4% increase from a previously estimated 3.0% rise.
The U.S. dollar index, which tracks the performance of the greenback against a basket of six major currencies, gained 0.40% to 87.38, the highest level since June 2010.