The dollar held its ground near 9 year highs against its peers on Friday even though data released on US manufacturing activity was discouraging as the dollar maintained support by the market predicting a rate increase by the Fed to take place soon. The Institute of Supply Management reported its manufacturing PMI down to its lowest level in 5 months registering at 55.5 for December from 58.7 in November while experts forecast a drop to 57.6.

The euro weakened against the dollar with the pair trading at new 4.5 year lows. Markit released data on the euro zone’s manufacturing PMI which declined from 50.8 in November to 50.6 in December while experts had predicted the index to be unchanged. Manufacturing PMI for Germany was unchanged at 51.2 for December matching forecasts while manufacturing PMI for France was down from 47.9 in November to 47.5 in December. European Central Bank President Draghi announced that massive stimulus measures could be introduced soon as ongoing risk of deflation in the euro zone cannot be ruled out.

The pound stayed close to 17 month lows against the dollar. Markit released data which revealed that UK’s manufacturing PMI dropped from 53.5 in November to 52.5 in December while experts had forecast an increase to 53.6. Other data highlighted an increase in UK mortgage approvals by 59,030 pounds in November above forecasts.

The yen weakened against the dollar with the pair trading above its 120 handle as predictions for the Federal Reserve to increase rates soon this year further supported the dollar. Differing policy outlook between the Bank of Japan and the Fed continue to diverge these two currencies. The yen was also weaker against the euro.

The Australian dollar remained near its 4.5 year low set last week against the dollar while the New Zealand dollar tanked nearly 1% against the dollar. The Canadian dollar weakened against the dollar with the pair trading at a 5 year high. Falling oil prices continue to weigh down these commodity associated currencies.

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