The US dollar was back on its heels on Wednesday, declining against a basket of trade-weighted currencies following unexpected weakness in employment, construction spending and manufacturing.
The US dollar index, which tracks the performance of the dollar against a basket of six currencies, declined 0.2% to 98.16. The index bottomed out at 97.98 earlier in the day after posting gains in three of the past four days.
The dollar lost ground against the euro and the Japanese yen. The EUR/USD advanced 0.34 percent to 1.0779 after briefly touching 1.08 in intraday trade. Meanwhile, the USD/JPY fell back below 1.20, declining 0.4% to 119.60.
The dollar was little changed against the British pound, as the GBP/USD traded at 1.4836.
Disappointing economic data took the sails out of the dollar on Wednesday. The ADP Institute reported that US job growth came in under 200,000 for the first time since January 2014, as employers added only 189,000 nonfarm payrolls in March. Employment growth cooled significantly in the goods-producing sector, as manufacturers cut employment by 1,000.
The Department of Labor will release official March nonfarm payrolls data on Friday.
The manufacturing sector cooled to a 22-month low in March, the Institute for Supply Management also reported on Wednesday. The ISM index of national manufacturing activity cooled to 51.5 in March from 52.9 the previous month as new orders grew at a slower rate and exports continued to decline. In total, ten of the 18 manufacturing industries reported growth last month, ISM data showed.
On Thursday the Commerce Department is expected to show another drop in factory orders, which measure demand for durable and nondurable goods. Factory orders are forecast to decline 0.4% following a 0.2% drop the previous month.
Separately, the Commerce Department said construction spending declined unexpectedly in February, likely an extension of severe winter weather. The value of construction put in place dropped 0.1% to $967.2 billion, following a revised drop of 1.7% in January that was originally reported as a 1.1% drop. A median estimate of economists forecast no change in February.
Economic growth is forecast to have slowed markedly in the first quarter, as severe weather, a strong dollar and a broad decline in consumer spending weighed on economic activity. The economy is forecast to rebound in the second quarter, although the impact of a stronger dollar will continue to weigh on overseas demand.
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