Dollar Treads Water Ahead of U.S. Economic Data

The dollar slipped against the euro and yen, with the market focused on Friday's U.S. jobs data for March and the week's other economic data for clues on when the Federal Reserve might cut interest rates.

The dollar barely reacted to a survey by the U.S. Institute for Supply and Management that was almost in line with expectations. The report showed manufacturing grew in March but at a slower pace than in February.

Analysts and investors were hoping the manufacturing data would yield further insight on the possible timing of a rate cut, but Friday's jobs figures remain the bigger focus.

"ISM is a bit disappointing after the large upside surprise in Chicago PMI, but the prices paid is sharply higher and this is going to save the dollar from a drubbing," said Brian Dolan, director of FX research at, referring to last week's report from Midwestern purchasing managers.

The prices paid number in the ISM report suggests inflationary pressures remain, and "this survey period probably did not encompass the most recent jump higher in energy prices, so there is more in the pipeline," Dolan said.

Earlier, the euro was little changed after a survey showed growth in the euro zone manufacturing sector slowed slightly in March. The data left intact expectations that the European Central Bank would raise rates as early as June.

Euro/dollar rose close to a recent two-year high above $1.34 last week after Washington said it will impose duties on imports of coated paper from China, raising fears of protectionism between the two countries.

Tokyo traders said the market was thin on the first day of the new Japanese business year. Europe will have a shorter week due to Easter holidays.

The yen also shrugged off Japan's quarterly tankan survey showing business confidence deteriorating for the first time in a year, as it did nothing to change expectations that the Bank of Japan will leave rates steady for some time after lifting them in February.

The Australian dollar, the day's best performer, hit a 10-year high of US$0.81813 . A climb over US$0.8215 would put the pair at the highest since October 1990, according to Reuters data.

A stronger-than-expected rise in Australian retail sales in February heightened risk that the Reserve Bank of Australia may raise interest rates as early as Wednesday when the central bank is due to announce a rate decision.