Investing.com - The dollar edged lower against the other major currencies on Monday, as markets digested the Bank of Japan’s decision to adopt negative interest rates, while concerns over global economic growth persisted.
USD/JPY was up 0.14% at 121.29.
The Japanese currency fell sharply on Friday after the BoJ’s shock decision to cut its deposit rate into negative territory as part of an ongoing effort to combat deflation.
The shift to negative interest rates is designed to encourage commercial lenders to use excess reserves they keep with the central bank to lend to businesses.
The BoJ also said it had not ruled out deeper cuts, warning that it would cut the interest rates further into negative territory if necessary.
The traditional safe haven yen remained lower despite official data on Monday showing that manufacturing activity in China contracted for a sixth straight month in January.
The Chinese manufacturing purchasing managers’ index slid to 49.4 from 49.7 in December, falling further below the 50 level separating contraction from growth.
A separate report showed that China’s Caixin factory PMI ticked up to 48.4 from 48.2 in December, indicating that the world’s second largest economy got off to a weak start in 2016.
EUR/USD added 0.27% to trade at 1.0862.
The euro’s gains were limited after data showed that growth in the euro zone manufacturing sector slowed last month, adding to fears over the risk of deflation in the region.
The euro zone manufacturing PMI dipped to 52.3 in January, down from 53.2 in December.
Elsewhere, the dollar was lower against the pound and the Swiss franc, with GBP/USD up 0.26% at 1.4280 and with USD/CHF slipping 0.13% to 1.0217.
Sterling found support after Markit said that its U.K. manufacturing PMI rose to a three-month high of 52.9 from December’s 52.1, compared to expectations for a downtick to 51.8.
Meanwhile, USD/CAD climbed 0.45% to 1.4045.
The Australian and New Zealand dollars were weaker, with AUD/USD down 0.35% at 0.7064 and with NZD/USD shedding 0.32% to trade at 0.6463.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.14% at 99.45.