Dollar jumps after U.S. data; bond prices slide

Tue Sep 2, 2014 4:31pm EDT
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By Herbert Lash

NEW YORK (Reuters) - The dollar rose to its highest this year against the yen on Tuesday on strong U.S. manufacturing and construction data, while the euro slipped to a 12-month low on speculation the European Central Bank will move toward looser monetary policy.

U.S. oil prices fell more than $3 a barrel, leading shares in the energy sector to account for almost half the decline in the S&P 500. Volume was light and the S&P closed slightly lower.

U.S. manufacturing hit a nearly 3-1/2 year peak in August and construction spending rebounded strongly in July, the latest signs of U.S. economic vigor.

The data lifted the dollar almost 0.8 percent against the Japanese yen, pushing it above the 105 yen mark for the first time since the first week of this year. The dollar last traded at 105.10 yen, up 0.72 percent on the day.

U.S. Treasuries US10YT=RR fell further on the data, with the 10-year note US10YT=RR off 21/32 in price to yield 2.4211 percent.

The euro EUR= sagged in early trade on bets ECB President Mario Draghi will do more to help a wobbly euro zone economy. But the currency later recouped its losses, up 0.01 percent at $1.3128.

Investors are waiting to see what Draghi does when ECB policymakers meet on Thursday, said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

"If (the market) becomes disappointed on Thursday because Draghi does not announce something more accommodative or stimulative, then you'll see European markets under pressure and flow over into the U.S. markets, at least temporarily," he said.   Continued...

Traders work on the floor of the New York Stock Exchange September 2, 2014. REUTERS/Brendan McDermid