The dollar and the yen fell on Monday as better than expected US factory data wiped out demand for safe haven currencies.

The Institute for Supply Management's manufacturing purchasing index rose to 51.5 in September from 49.6 a month earlier. Crucially, the gauge of manufacturing activity did not contract again and came in better than forecasts of around 49.7 for September. Any reading above 50 signals expansion.

The ICE dollar index, which measures the US currency against a basket of six other currencies, fell to 79.795 from 79.896 on Friday.

Markets also digested comments from US Federal Reserve Chairman Ben Bernanke about the latest round of monetary policy. Recently other Fed members have criticised the last round of quantitative easing saying it was the wrong medicine and many are concerned that too many people remain out of work.

Bernanke defended the latest bond-buying programme, saying it was necessary to support the weak economic recovery.

The euro rose to $1.2883, pulling off a three week low against the dollar, after encouraging German data.

Against the yen, the dollar bought ¥78.01 from ¥77.92 the previous session while the Australian dollar was hardly changed at $1.0371. The euro rose to ¥100.55.

Sterling declined to a one-week low against the euro on Monday after data showed UK manufacturing activity weakened more than expected last month.


CJ

Related share prices