Dollar reached 20-Month Low as U.S. Manufacturing Contracts
The dollar tumbled to the lowest level since March 2005 against the euro after a report showed U.S. manufacturing unexpectedly contracted last month for the first time in more than three years.The dollar weakened to $1.33 per euro for the first time in 20 months as the Institute for Supply Management index prompted traders to increase bets the Federal Reserve will cut interest rates, shrinking the rate advantage of the currency.
The financial markets reacted sharply to the report, with stocks falling and bond prices rallying on the fresh signs of economic weakness.
The ISM factory index has fallen for three straight months.
Readings below 50% indicate contraction in the manufacturing sector. The index had been growing for more than three years.
The decline was unexpected. Economists had forecast an increase to 51.8%, although a weak Chicago PMI report on Thursday had shaken some faith in that number.