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Currencies: Surprise China rate cut pushes dollar higher

LONDON (MarketWatch) — The dollar shrugged off a slate of weak economic data Monday to trade higher against the euro, yen and pound, benefiting from a surprise rate cut from the People’s Bank of China.

The central bank cut its benchmark lending and deposit rates by a quarter of a percentage point on Saturday, raising concerns about flagging growth in the world’s second-largest economy.

Th move highlighted the divergence between the U.S. economy and economies in Asia and Europe, said Jameel Ahmad, chief market analyst at FXTM.

“At a time when so many central banks are shifting stance and unexpectedly easing monetary policy, optimism that the Federal Reserve will still be raising US interest rates at some point this year is enough to support the USD uptrend,” Ahmad wrote.

The euro EURUSD, -0.12%  fell to $ 1.1195, flat compared with its Friday-afternoon value of $ 1.1198. The buck USDJPY, +0.38%  traded at 120.08 yen, its highest level in nearly three weeks. It traded at ¥119.63 Friday. The pound GBPUSD, -0.48%  traded at $ 1.53, compared with $ 1.54 Friday.

Personal spending declined more than expected in January, which could weigh on gross domestic product growth, if consumer spending doesn’t pick up in March, Ahmad wrote.

The dollar shrugged off a report from the Institute for Supply Management showing that its manufacturing index fell to 52.9% in February, a fourth monthly decline. Economists polled by MarketWatch expected a reading of 52.8%.

The ICE U.S. Dollar Index, a measure of the greenback’s strength against a trade-weighted basket of six rival currencies, DXY, -0.05%  rose 0.1% to 95.37.

The greenback finished February higher against the euro for the eighth straight month.

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