Investing.com - The dollar moved higher against the yen on Tuesday as concerns over emerging markets eased, while the euro remained lower ahead of the upcoming European Central Bank meeting on Thursday.
USD/JPY was up 0.45% to 101.43, recovering from two-month lows of 100.76 reached earlier in the trading day.
Market sentiment improved as a broad based selloff in emerging markets paused, but investors remained cautious after poor U.S. manufacturing data on Monday raised concerns over a possible slowdown in the economic recovery.
A report by the Institute of Supply Management showed that its manufacturing index fell to a seven-month low in January, as new orders slumped.
The data cast doubts over the outlook for the economic recovery, ahead of Friday’s U.S. jobs report for January, after December’s report showed that the economy added far fewer jobs than expected.
Data released on Tuesday showed that U.S. factory orders fell 1.5% in January, compared to expectations for a decline of 1.7%.
EUR/USD slipped 0.15% to 1.3506. The euro remained under pressure after data last week showing that the annual rate of euro zone inflation slowed in January reawakened concerns that the ECB may tighten policy in order to stave off the risk of deflation.
Elsewhere, the pound edged lower against the dollar, with GBP/USD dipping 0.06% to 1.6294. The pair rose to session highs of 1.6344 earlier after data showed that construction output in the U.K. rose at the fastest rate since August 2007 in January, indicating that the economic recovery is continuing.
Markit said the U.K. construction purchasing managers’ index came in at 64.6 in January, up from 62.1 in December, compared to expectations for a fall to 61.5.
The dollar was higher against the Swiss franc, with USD/CHF up 0.43% to 0.9046.
The Australian dollar held strong gains, with AUD/USD up 1.69% to 0.8899 after the Reserve Bank of Australia shifted its policy stance away from easing rates on Tuesday, citing higher than forecast inflation at its latest policy meeting.
The RBA left rates on hold at 2.5%, saying “the most prudent course is likely to be a period of stability in interest rates."
The New Zealand dollar was also higher, tracking gains in Australia’s dollar, with NZD/USD up 1.04% to 0.8168.
The U.S. dollar was lower against the Canadian dollar, with USD/CAD down 0.34% to 1.1079.
The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.18% to 81.27.