Forex: Tuesday's review

he dollar declined against all its most-traded counterparts as a report showed U.S. manufacturing rose at the fastest pace in almost seven years, encouraging demand for higher-yielding assets.
The Institute for Supply Management’s U.S. manufacturing index unexpectedly increased to 60.8 in January from 58.5 in the previous month, the Tempe, Arizona, group reported. That indicates the fastest growth since May 2004.

The euro rose above $1.38 as the purchasing managers’ index for Europe increased.
A gauge of manufacturing in the euro region rose to 57.3 in January from 57.1 in December, London-based Markit Economics said today. That’s the highest since April and above the initially reported 56.9.
Egyptian protesters began gathering in Cairo for a march as newly appointed Vice President Omar Suleiman said late yesterday that President Hosni Mubarak instructed him to start a dialogue with the demonstrators. The military promised not to fire on marchers and said that it recognized “the legitimacy” of the people’s demands.
“We’re not looking at any major fallout globally from Egypt at the moment,” said Brian Dolan, chief strategist at FOREX.com.
The pound advanced as much as 0.9%.
The Bank of England will raise its 0.5% main rate three times this year to prevent a surge in consumer prices from becoming entrenched, according to the National Institute for Economic and Social Research. The group forecasts that the rate will rise to 1.25% by year-end, compared with an October forecast of 0.75%.
“The market is going with the idea that the chances of a Bank of England rate hike are increasing,” Forex.com’s Dolan said. “The move is not done yet. The pound is not giving back very much.”
Australia’s dollar rose to a level stronger than parity with the greenback for the first time in three days as the Reserve Bank of Australia said the global economy looks strong and there are signs of rising private investment in the nation amid higher commodity prices.
The central bank left its cash target at 4.75% and signaled inflation was likely to remain within its 2% to 3% target range in the year ahead.