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Institute Of Supply Management Index Increase
The US dollar is up on news of an Institute of Supply Management Index increase. As United States manufacturing expands it is bringing the US economy with it. The Institute of Supply Management is a nearly century old not for profit organization. Its monthly manufacturing report on business is closely watched as an economic indicator. According to the May report the US economy has grown for thirty-five months in a row and US manufacturing has grown for thirty-three months. According to the report, employment, production, and new orders all increased while raw material costs remained stable. Despite persistent worries about the effects of the European debt crisis on the US economy and dollar the Institute of Supply Management Index increase indicates a slow but steady rise of US manufacturing over the last three years. With China seeing a slowdown in exports and Europe looking at an austerity driven recession, the USA and US dollar have become attractive. There was some surprise at the ISM report as previous data had indicated a falloff in manufacturing in the Northeast region of the USA.
Many currency traders are still concerned about strength of the dollar over the long term even as the Institute of Supply Management Index rises. The concern is the large US debt and the measures needed to stimulate the economy and bring the economy this far out of a recession. The United States Federal Reserve has engaged in large purchases of US treasuries in order to drive interest rates down. This is down with printed money. The expected long term result of excessive use of the printing press is a devalued currency. However, the Federal Reserve’s first concern has been economic collapse and widespread unemployment. As these issues are successfully deal with the Fed has implied that there is current no more need for stimulus measures. However, the Fed is also keeping that option open. Thus currency markets have spent a lot of time following the action of the Federal Reserve, the European Central Bank, and other central banks for clues to where currency rates are going. As the Institute of Supply Management Index rises further it may be possible to successful trade the dollar using real economic news and not pronouncement of monetary policy. To a degree huge economic events such as Euro Zone economic contraction can be masked by the measures of central banks and government policy makers.
As the Institute of Supply Management Index rises so has the dollar, for the time being. Unfortunately there is a plethora of bad news in the world. The Chinese real estate market is said to be ready to collapse and exports from the Asian powerhouse have fallen off of late. China is making efforts to let the Yuan float with the market. It would like for its currency to join the ranks of reserve currencies of the world.