Investing.com - The dollar rose against the yen on Tuesday after investors viewed the greenback as oversold in wake of a poor U.S. factory report released on Monday that weakened the currency.
In U.S. trading, USD/JPY was up 0.56% and trading at 101.55, up from a session low of 100.76 and off a high of 101.63.
The pair was expected to test support at 100.76, the earlier low, and resistance at 102.24, Friday's high.
The dollar and U.S. stock markets took a beating on Monday after the Institute for Supply Management said its manufacturing index fell to a seven-month low in January, as new orders slumped.
The ISM’s manufacturing purchasing managers’ index came in at 51.3 in January, down from 57.0 in December.
Analysts were expecting the index to inch down to 56.4 in January.
The report added new order growth fell at its fastest rate in 33 years, with the new orders index dropping to 51.2 from 64.4 in December. The employment index fell from 55.8 in December to 52.3, the weakest since June.
Also on Monday, U.K.-based Markit Economics reported that its U.S. manufacturing PMI came in at a three-month low of 53.7 for January, missing expectations for a 53.8 reading.
The soft numbers reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, or even leave it on hold if need be, while policy tightening remains far off on the horizon.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
On Tuesday, however, the dollar regained ground, especially on sentiments that harsh winter weather may have played a role on economic indicators' poor showing, though capping gains were fears that winter storms notwithstanding, the global economy still may be facing a soft patch.
Elsewhere, the Commerce Department reported earlier Tuesday that U.S. factory orders fell 1.5% in January, better than expectations for a decline of 1.7%.
Profit-taking meanwhile sent the yen falling, especially as U.S. and other stock markets recovered from the recent selloff.
The yen has served as the safe-haven currency of choice amid ongoing concerns that emerging markets will remain volatile due to a possible slowdown in China and less stimulus from the Federal Reserve sending funds trickling into non-U.S. stock markets.
The yen, meanwhile, was down against the euro and up against the pound, with EUR/JPY up 0.41% at 137.13, and GBP/JPY trading up 0.54% at 165.55.
On Wednesday, the U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Meanwhile, the ISM is to publish a report service-sector activity.