Dollar Near 3-Week Low as U.S., China Manufacturing Buoy Stocks

July 2 (Bloomberg) -- The dollar traded near a three-week low against the euro after U.S. and Chinese factory reports added to evidence the global recession is easing, boosting demand for higher-yielding assets.

The euro traded close to a two-week high versus the yen on speculation the European Central Bank will keep interest rates unchanged at a meeting today, encouraging investors to seek higher returns in the 16-nation region. The dollar was little changed against the British pound before a U.S. Labor Department report today that economists said will show the nation lost jobs for an 18th consecutive month.

“Economic data are helping to improve investor sentiment,” said Danica Hampton, a currency strategist in Wellington at Bank of New Zealand Ltd., the country’s third- largest lender. “This may reduce ‘safe-haven’ demand for the dollar and the yen.”

The dollar traded $1.4138 per euro as of 8:45 a.m. in Tokyo from $1.4142 in New York yesterday, when it reached $1.4201, the lowest level since June 5. The euro was at 136.48 yen from 136.70 after touching 136.89 yesterday, the strongest since June 15. The U.S. currency fetched 96.53 yen from 96.65 yen. The dollar was at $1.6482 per pound from $1.6478.

The Standard & Poor’s 500 Index advanced 0.4 percent yesterday after posting a 15 percent second-quarter rally.

The greenback rose to an eight-day high against the yen in New York yesterday before today’s jobs report. Employers eliminated 365,000 jobs last month after May’s 345,000 decrease, according to a Bloomberg News survey of economists.

U.S., China Manufacturing

U.S. manufacturing shrank in June at the slowest pace in 10 months, the Institute for Supply Management reported yesterday. The Tempe, Arizona-based group’s factory index rose to 44.8, the highest level since August, from 42.8 in May. Readings below 50 signal contraction.

China’s manufacturing expanded for a fourth month. The official Purchasing Managers’ Index rose to a seasonally adjusted 53.2 last month from 53.1 in May, the Federation of Logistics and Purchasing said yesterday. A reading above 50 indicates an expansion.

The euro rose against the dollar yesterday as retail sales in Germany, Europe’s largest economy, unexpectedly increased for a third month in May. A European Central Bank council member, Axel Weber, who heads the Bundesbank, said last week policy makers have used up their scope to cut rates.

The ECB will leave its benchmark interest rates at 1 percent today, according to the median estimate of economists surveyed by Bloomberg News. The euro area’s benchmark compares with 0.1 percent in Japan and as low as zero in the U.S.