Currency converter wise money waits

The dollar remained broadly weaker yesterday after the US manufacturing ISM fell by slightly more than expected, confirming the general downward trend in the US economy. The US manufacturing ISM decreased to 52.0 in September from 52.9 in August and lower than the 52.8 we had expected.

When you look at the absolute level as the lowest in six months and the trend as three straight monthly declines, it's not the picture of health that other factory anecdotes have painted. The next indicator of note out of the US will be the non-manufacturing ISM on Wednesday, expected to slip to 54.5 in September from 55.8 in August.

The euro hit yet another record high at 1.4282 usd. It came off that peak in early trade yesterday on some profit-taking and after the manufacturing PMIs showed the impact of the strong single currency and higher borrowing costs on the euro zone's economy.

The PMI was confirmed from the preliminary estimate to have fallen to 53.2, down from 54.3 in August.

But euro traders are mostly holding their breath ahead of the European Central Bank policy meeting on Thursday, when rates are expected to be left unchanged. The key driver for markets will be the accompanying statement by ECB President Trichet, depending on whether he reiterates an inflation bias or signals that a 'wait and see' mood will prevail as long as the fall out from the credit crisis remains unclear.

The euro remains propped by the ECB's persistently hawkish rhetoric, which was justified last week by a 2.1 % inflation release in September, which is the highest since August 2006.

Elsewhere, the Pound has also come off highs against the dollar, due to a drop in the UK manufacturing PMI and reflecting an increased volatility in the UK currency. The pound has further upside to enjoy as financial markets are quite aggressively pricing in rate cuts by the Bank of England. Markets are pricing in a 46 % chance of a rate cut this Thursday and an 80 % chance of a cut in November.

Finally, the Canadian dollar, a commodity-driven currency, hit a new 31-year high of $1.0093 yesterday before retreating to 99.12 U.S. cents in later trading, beating Friday's previous high of $1.0091. The currency, which traded at 99.37 U.S. cents in late trading Friday, has gained strongly in September on the rise of its exports and the weakness of the U.S. dollar, achieving 1-to-1 parity with the U.S. dollar for the first time in nearly 31 years on Sept. 20.

The Australian dollar, also a commodity-driven currency, hit an 18-year high against the dollar at 89.48. The Institute for Supply Management's factory index, measures the growth of U.S. manufacturing. It showed September manufacturing at 52.0, below forecasts, and at its slowest pace in six months.

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