Dollar drops as weak US data sinks rate-hike hopes

The dollar slumped in Asia Wednesday as another weak batch of US data all but hammered any chance of the Federal Reserve hiking interest rates this month.

The Institute for Supply Management said its US non-manufacturing purchasing managers’ index (PMI) — a key reading of the all-important US service sector — had dived to its lowest level in more than six years.

The data follows figures showing a slowdown in jobs creation and factory activity, hitting hopes that the world’s top economy was strong enough to withstand higher borrowing costs.

“The trifecta of terrible ISM manufacturing and non-manufacturing PMIs and weaker-than-expected non-farm payrolls have left the quixotic calls for a September rate hike dead in the water,” Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients.

“This is no longer a September story — for even a December rate hike to occur both … PMIs are going to have to stage quite a rapid recovery in the next month or so.”

In Tokyo, the dollar dropped to 101.39 yen from 101.99 yen in New York and well off the 103.60 yen earlier Tuesday in Asia.

The greenback also slumped more than one percent to a near one-year low against the South Korean won, while it was also sharply down against the Australian and Singapore dollars, Indonesian rupiah and Turkish lira.

The euro bought $1.1251 against $1.1257, while it slipped to 114.14 yen from 114.81 yen.