Dollar drops after downbeat U.S. manufacturing data

NEW YORK – The dollar fell against other major currencies Monday after a U.S. manufacturing report for March came in weaker than expected, raising concerns about slowing growth in the sector.

The dollar’s weakness came in a quiet market following the Easter holiday weekend while European markets were closed.

The euro bought $1.2847 around 2100 GMT, up from $1.2818 at the same time late Friday.

The dollar fell against the Japanese currency, to 93.27 yen from 94.20 yen late Friday, while the euro dropped to 119.82 yen from 120.68 yen.

The Institute for Supply Management said its U.S. manufacturing index fell to 51.3 in March from 54.2 in February, reflecting growth for the fourth straight month but at a slower pace.

“The dollar weakened against all of the major currencies after the ISM index dropped,” said Kathy Lien of BK Asset Management.

“The deterioration was more significant than anticipated and raises concerns about the pace of recovery in the manufacturing sector.”

Lien said that all eyes would be on the European Central Bank’s monetary policy meeting this week.

“The ECB is widely expected to keep monetary policy unchanged but with German data weakening and Cyprus requiring a bailout, the ECB could be warming to the idea of additional stimulus,” she said.

David Song of DailyFX highlighted the possibility of an interest rate cut.

“As the fundamental outlook for the region turns increasingly bleak, the ECB remains poised to strike a dovish tone for monetary policy, and we may see a growing number of central bank officials show a greater willingness to push the benchmark interest rate to a fresh record-low as the recession threatens price stability,” Song said.

The dollar dropped against the Swiss currency, to 0.9466 francs from 0.9488 francs late Friday, and weakened against the British pound, which fetched $1.5232 compared with $1.5191.