Investing.com - The dollar strengthened against most of its peers on Monday on news that Japan unexpectedly fell into a recession last quarter, while a mixed bag of U.S. data came in positive enough to convince investors that U.S. recovery remains on track.
In U.S. trading on Monday, EUR/USD was down 0.60% at 1.2452.
The dollar was up against the yen, with USD/JPY up 0.14% at 116.45, and up against the Swiss franc, with USD/CHF up 0.62% at 0.9650.
Official data released earlier revealed that Japan’s gross domestic product contracted by an annualized 1.6% in the third quarter following a 7.3% drop in the preceding quarter, which puts the country in a recession.
Economists were forecasting a 2.3% growth rate.
Separately, Japanese Prime Minister Shinzo Abe was expected to postpone a planned sales tax increase due to come into effect next year after a sales tax hike in April of this year acted as a drag on growth.
The prime minister was also expected to call for snap elections which could take place as soon as next month.
The yen plunged on the news though it later recovered, as investors ditched Japanese stocks and later snapped up nicely-priced positions in the currency.
The yen often rises when Japanese stocks fall.
Elsewhere, news of Japan's recession offset mixed U.S. economic indicators.
The Federal Reserve reported earlier that industrial production contracted by 0.1% in October, disappointing expectations for a gain of 0.3%.
Industrial production for September was revised down to a gain of 0.8% from a previously reported increase of 1.0%.
The report showed that the capacity utilization rate, a measure of how fully firms are using their resources, dipped to 78.9% in October from 79.2% in September, missing expectations for a 79.3% reading.
In a separate report, the Federal Reserve Bank of New York said that its general business conditions index increased to 10.2 this month 6.2 in October. Analysts had expected the index to rise to 11.1 in November, though a reading above 0.0 indicates improving conditions, which gave the dollar support.
The new orders index rose eleven points to 9.1, and the shipments index advanced eleven points to 11.8.
The index for number of employees edged down to 8.5 but remained positive, indicating that employment levels grew, which also bolstered the greenback.
Indexes for the six-month outlook were generally higher this month and conveyed a strong degree of optimism about future business conditions.
The Empire State index is of interest to traders primarily because it is seen as an early forecast of the Institute for Supply Management's widely-watched factory survey.
Meanwhile in Europe, Germany’s Bundesbank warned in its monthly report that the outlook for growth in the region’s largest economy was likely to remain weak in the next few months.
“The further deterioration in economic expectations and the stagnation of new orders point to a rather sluggish course of economic development in Germany until at least the end of 2014," the Bundesbank said.
“No marked recovery in important euro-area partner countries has yet materialized,” it added.
The report also argued that the European Central Bank should not embark on a larger stimulus program, saying it would not be constructive.
Earlier Monday, data showed that euro zone exports jumped 9% on a year-over-year basis in September, boosting the trade surplus to €17.7 billion, from €15.4 in August. The surge in exports boosted the outlook for third-quarter growth.
The greenback was up against the pound, with GBP/USD down 0.20% at 1.5640.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.09% at 1.1297, AUD/USD down 0.53% at 0.8713 and NZD/USD up 0.14% at 0.7917.
The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.45% at 88.00.
The U.S. is to release data on producer price inflation.