Investing.com - The greenback gained ground against most major currencies on Tuesday after investors viewed the currency as oversold in wake of Monday''s selloff stemming from a poor U.S. factory report.
In U.S. trading on Tuesday, EUR/USD was down 0.09% at 1.3516.
The dollar and U.S. stock markets took a beating on Monday after the Institute for Supply Management said its manufacturing index fell to a seven-month low in January.
The ISM’s manufacturing purchasing managers’ index came in at 51.3 in January, down from 57.0 in December.
Analysts were expecting the index to inch down to 56.4 in January.
The report added new order growth fell at its fastest rate in 33 years, with the new orders index dropping to 51.2 from 64.4 in December. The employment index fell from 55.8 in December to 52.3, the weakest since June.
Also on Monday, U.K.-based Markit Economics reported that its U.S. manufacturing PMI came in at a three-month low of 53.7 for January, missing expectations for a 53.8 reading.
The soft numbers reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, or even leave it on hold if need be, while policy tightening remains far off on the horizon.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
On Tuesday, however, the dollar regained ground, especially on sentiments that harsh winter weather may have played a role in the economic indicator''s poor showing, though capping gains were fears that winter storms notwithstanding, the U.S. economy still may be facing a soft patch.
Elsewhere, the Commerce Department reported earlier Tuesday that U.S. factory orders fell 1.5% in January, better than expectations for a decline of 1.7%.
The dollar was up against the yen, with USD/JPY up 0.66% at 101.65, and up against the Swiss franc, with USD/CHF up 0.38% at 0.9042.
Profit-taking meanwhile sent the yen falling, especially as U.S. and other stock markets recovered from the recent selloff.
The yen has served as the safe-haven currency of choice amid ongoing concerns that emerging markets will remain volatile due to a possible slowdown in China and less stimulus from the Federal Reserve sending funds trickling into non-U.S. stock markets.
The greenback was down against the pound, with GBP/USD up 0.12% at 1.6324.
The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.43% at 1.1070, AUD/USD up 2.11% at 0.8936 and NZD/USD up 1.51% at 0.8207.
The Reserve Bank of Australia earlier shifted its policy stance away from easing rates on Tuesday, citing higher-than-forecast inflation at its latest policy meeting.
The RBA left rates on hold at 2.5%, saying “the most prudent course is likely to be a period of stability in interest rates," which bolstered the Aussie and the New Zealand currency as well.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.13% at 81.23.
On Wednesday, the U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Meanwhile, the ISM is to publish a report service-sector activity.