Investing.com - The euro dropped to one-year lows against the dollar on Tuesday after data revealed U.S. manufacturers were busier in August than markets were expecting, though bargain hunting brought the single currency off earlier lows.
In U.S. trading, EUR/USD was down 0.03% at 1.3125, up from a session low of 1.3110 and off a high of 1.3137.
The pair was likely to find support at 1.3103, the low from Sept. 6, 2013, and resistance at 1.3220, last Thursday's high.
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.
Geopolitical concerns softened the dollar's advance as well.
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.
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.
Elsewhere, the euro was up against the pound, with EUR/GBP up 0.60% at 0.7952, and up against the yen, with EUR/JPY up 0.68% at 137.93.
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.
On Wednesday, the euro zone is to release data on retail sales, while the U.S. is to publish data on factory orders.