Investing.com - The dollar traded higher against most major currencies on Tuesday after a widely-watched U.S. factory gauge beat expectations, while sentiments the European Central Bank may loosen policy added to the greenback's rally.
In U.S. trading on Tuesday, EUR/USD was down 0.02% at 1.3126.
The greenback firmed after the Institute for Supply Management reported that its manufacturing purchasing managers’ index jumped to 59.0 in August from 57.1 in July, defying analysts' calls for the index to tick down to 56.8.
On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.
The new orders component of the index rose to 66.7, an increase of 3.3 points from 63.4 in July.
The employment index grew for the fourteenth consecutive month the report said, registering 58.1, down 0.01 points from 58.2 in July.
Also in the U.S., the Census Bureau reported earlier that U.S. construction spending rose to 1.8% in July from -0.9% in June, whose figure was revised up from -1.8%.
Analysts had expected U.S. construction spending to rise to 1.0% last month.
The numbers fueled market expectations for the Federal Reserve to wind down stimulus programs as early as next month and raise interest rates some time next year.
The euro, meanwhile, came under pressure due to ongoing expectations for the European Central Bank to loosen policy while the Fed takes steps to tighten, though bottom fishers brought the single currency off earlier lows.
The European Central Bank will hold a policy meeting on Thursday.
Geopolitical concerns capped the greenback's advance slightly.
Russian President Vladimir Putin reportedly said he could "take Kiev" in a matter of weeks, according to recent media reports, though Moscow later downplayed that statement.
Both the U.S. and Russia have accused each other of stirring up trouble in Ukraine.
Geopolitical concerns often dampen the dollar by stoking fears the global economy may slow and drag on an otherwise increasingly robust U.S. recovery.
Meanwhile, investors kept on eye out for the August U.S. employment report, due for release on Friday, which could contain a weather vane pointing to the future direction of monetary policy.
The dollar was up against the yen, with USD/JPY up 0.75% at 105.13, and down against the Swiss franc, with USD/CHF down 0.03% at 0.9193.
The yen came under pressure on amid market talk that Japanese Prime Minister Shinzo Abe will appoint a policy maker who may shift pension funds toward riskier assets.
Reports that Abe may name Yasuhisa Shiozaki, deputy policy chief of the Liberal Democratic Party, to run the health ministry softened the yen, as the ministry manages the Government Pension Investment Fund.
The greenback was up against the pound, with GBP/USD down 0.79% at 1.6475.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.49% at 1.0924, AUD/USD down 0.61% at 0.9275 and NZD/USD down 0.81% at 0.8308.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.28% at 83.01.
On Wednesday, the U.S. is to publish data on factory orders.