- The dollar dropped against the yen on Monday in wake of disappointing U.S. factory data, while ongoing fears emerging markets are cooling continued to boost demand for the Japanese currency.

In U.S. trading, USD/JPY was down 0.88% and trading at 101.12, up from a session low of 101.05 and off a high of 102.42.

The pair was expected to test support at 99.57, the low from Nov. 19, and resistance at 102.94, Friday''s high.

The dollar softened after the Institute for Supply Management said its U.S. manufacturing index fell to a seven-month low in January, as new orders slumped.

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 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, and won''t tighten policy anytime in the foreseeable future.

Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.

The yen continued to see safe-haven demand due to 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 yen, meanwhile, was up against the euro and up against the pound, with EUR/JPY down 0.79% at 136.66, and GBP/JPY trading down 1.81% at 164.79.

Markit Economics said the U.K. manufacturing purchasing managers’ index fell to 56.7 in January, down from 57.2 in December and below estimates for a reading of 57.0.

On Tuesday, the U.S. is to produce data on factory orders, a leading indicator of production.

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