Dollar dives as economic reports boost confidence

The United States dollar took a dive Wednesday after upbeat manufacturing reports in the US and China, the world's two biggest economies, counter-acted fears that the global recovery is faltering.

In late trading in New York Wednesday, the euro, used by 16 European countries, rose to $1.2798 from $1.2665 late Tuesday.

The British pound gained to $1.5446 from $1.5335, while the dollar fell to 1.0525 Canadian dollars from 1.0672 Canadian dollars.

The dollar was also sharply lower versus the Australian dollar after that country said its economy grew at the fastest pace in three years during the second quarter thanks to strong demand for its commodities.

The dollar also dropped against currencies of emerging economies and other big commodity exporters around the world.

Helping propel these currencies was a Wednesday report on manufacturing in China, a voracious importer of commodities, that showed an increase in the industrial sector to the highest level in three months. Auto sales also rebounded in August.

Economists have worried that growth is slowing sharply in China, cutting into its demand for raw materials and finished goods from around the world. China is the number-three export market for the US and a major trading partner for Europe.

Also on Wednesday, an industry report in the US said the manufacturing sector expanded in August for the 13 straight month.

The Institute for Supply Management's index jumped to 56.3 last month from 55.5 in July, while economists had expected the index to slip to 53. A reading above 50 indicates growth.

While the broader US economy is still expected to grow more moderately in the second half of the year, the two reports helped to alleviate some fears of a steep slowdown in China or contraction in the US.

In other trading in New York, the dollar edged lower to 1.0160 Swiss francs from 1.0164 Swiss francs, and gained to 84.46 yen from 84.07 yen.

The two currencies have strengthened this summer as uncertainty about the sustainability of the global recovery drove investors to safety.

Investors consider them safe havens and tend to buy them up when uneasiness or worries about future tepid growth dominate trading.

-AP