The US dollar rebounded against the yen and hit one-month highs against the euro on Tuesday after traders saw the Japanese currency's rally as overextended, while strong US manufacturing data supported views of higher US interest rates. The greenback rose 1 percent against the yen to a session high of 113.82 yen after posting its worst one-day dip against the currency in more than two weeks on Monday and closing out its worst month against the yen since 2008 in February.
"Manufacturing is not in the all-clear, but it may not be falling to pieces as quickly as we thought," said Richard Franulovich, senior currency strategist at Westpac in New York. "It suggests the US economy is on a healthier track, which is an important piece of news for the Fed."
The euro hit a one-month low against the dollar of $1.0836. Analysts said traders were selling the euro ahead of March 10, when the European Central Bank is expected to weaken the currency by announcing more stimulus. The euro has been losing ground since peaking at $1.1375 on February 11, which was its highest level since October 21. Investors have tended to buy the dollar and sell the yen when the greenback falls below 112.50 yen, Lien said. The dollar dipped below that level on Tuesday, to a session low of 112.18 yen.
The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.21 percent at 98.418 after hitting a nearly one-month high of 98.570 after the US economic data. The dollar was last up 0.92 percent against the yen at 113.70 yen. The euro was last down 0.05 percent against the dollar at $1.0866, while the dollar was down 0.1 percent against the Swiss franc at 0.9970 franc.
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