Dollar slumps on soft U.S. service-sector report

Investing.com - The greenback traded lower against most major currencies on Monday after U.S. service-sector data missed consensus forecasts and rekindled expectations for the Federal Reserve to take its time winding down its dollar-weakening USD75 billion monthly asset-purchasing program.

In U.S. trading on Monday, EUR/USD was up 0.32% at 1.3633. The dollar slumped after the Institute of Supply Management said its non-manufacturing purchasing managers' index fell to 53.0 in December from 53.9 in November.
Analysts were expecting the index to increase to 54.5. The data rekindled concerns that the Federal Reserve may go slower than once expected when it comes to dismantling its USD75 billion in monthly bond purchases.

Fed officials have said they will pay close attention to data when deciding to taper the program any more.

Fed asset purchases weaken the dollar by keeping interest rates low and sending investors to asset-classes like stocks or gold as long as they remain in effect.

A separate report showed that U.S. factory orders rose 1.8% in November, in line with expectations, after a 0.9% fall the previous month.

Meanwhile, in the euro zone, data released on Monday showed that the bloc's services PMI came in at 51.0 in December, unchanged from the preliminary estimate and down slightly from 51.2 in November.

Separate reports showed that activity in Spain's private sector expanded at the fastest rate in 77 months, but activity in France and Italy contracted last month.

The greenback was down against the pound, with GBP/USD down 0.08% at 1.6406. Markit Economics reported earlier that its Markit/CIPS Services Purchasing Managers Index declined to a six-month low of 58.8 in December from 60.0 in November.

Analysts had expected an unchanged reading, and the data sent the pound in and out of negative territory. Despite the slowdown the index still remained well above the 50.0 level that indicates expansion.

The report said confidence rose and the economy still looks likely to have expanded strongly in the fourth quarter.

The dollar was down against the yen, with USD/JPY down 0.52% at 104.30, and down against the Swiss franc, with USD/CHF down 0.12% at 0.9042.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.14% at 1.0651, AUD/USD up 0.17% at 0.8964 and NZD/USD trading up 0.20% at 0.8288.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.26% at 80.81.

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