The U.S. dollar fell on Monday, as appetite for risk waned amid downbeat Chinese factory surveys, which also lent support to the low-yielding euro and the safe-haven yen.
Demand for both currencies has risen in recent times when worry about a sharp Chinese slowdown led to economic uncertainty and financial market stress. The same concern forced the Federal Reserve to put off raising U.S. interest rates, weakening the dollar this summer.
Traders said some investors judged ECB President Mario Draghi’s comments at the weekend on monetary policy as not very dovish, although German bond yields eased. The comments helped the euro gain ground above $1.10.
In a morning note, Morgan Stanley analysts said it appeared that Draghi had stiffened the bank’s policy stance, saying that more stimulus in December is an open question.
“We regard this statement as part of an expectation-management exercise in order to maintain parts of the surprise element should the ECB cut its deposit rate in December,” the U.S. investment bank said.
The euro rose 0.3 percent to $1.1035 and 0.1 percent against the yen to 132.80 yen. The dollar slipped 0.1 percent against the yen to trade at 120.45 yen. The dollar index was down 0.2 percent at 96.75.
“The weekend comment from Draghi was a bit more balanced and neutral than before, which is triggering some short-covering in the euro,” said Yujiro Goto, a currency analyst at Nomura. “The data from China is also disappointing and we are seeing a bit of risk aversion because of that.”
China’s manufacturing sector unexpectedly contracted in October for a third straight month, an official survey showed on Sunday. A private factory survey on Monday also showed activity fell for an eight consecutive month in October.
Dollar bulls are likely to stay cautious until the U.S. non-farm payrolls report on Friday.
The Federal Reserve held interest rates near zero last week but signalled that a December rate rise remained in play.
Data released on Friday by the Commodity Futures Trading Commission showed the value of the dollar’s net long position jumped to $21.6 billion in the week ended Oct. 27, from $13.32 billion the week before.
That was the largest net long position since late September, after declining for three straight weeks.