The US dollar edged higher against most major currencies overnight, but erased some of those gains this morning. Overnight, stocks pulled back even after stronger than expected Eurozone data and stabilization in China's stock market. As sentiment for risk aversion is brought back to the forefront, many will keep an eye on the US Institute for Supply Management's manufacturing gauge which rose to 52.9 in August, up from 48.9 in July. Analysts had forecasted the gauge to show a reading of 50.5 in August. The report shows the US manufacturing sector registered the first month of expansion in more than a year and a half.

The euro initially weakened against the dollar overnight despite better than expected Eurozone economic data, but recouped some of those losses this morning. Data showed the Eurozone purchasing manager's
index rose to 48.2 in August, better than the forecasts at 47.9, while German unemployment unexpectedly fell in August by 1,000.

The British pound weakened against the euro and dollar after a surprisingly weak reading of UK manufacturing and lending. British manufacturing activity fell to 49.7 in August, lower than forecasts at 51.5. The reading came in below the crucial 50 level separating expansion from contraction, casting doubts on the UK economy's recovery prospects. Net UK lending fell in July at its sharpest pace since records began in 1993, despite mortgages approvals rising to their highest since April 2008, indicating credit conditions remain tight. With UK PMI reading below the 50 level and lending falling, many are forecasting the Bank of England to keep rates at a record low of 0.5%.

The Japanese yen rallied overnight against the dollar but lost some of those gains as investors' risk appetite improved. As investors exit riskier assets, currencies such as the yen and dollar strengthen on safe-haven flows.

The Canadian dollar is slightly stronger vs. the US dollar, as oil prices climbed above $71 a barrel and US stocks rose. The loonie should remain fairly steady until Friday's key jobs report and unemployment rate.

The Australian dollar remains mostly unchanged vs. the US dollar after positive US economic news. Overnight, the Aussie dipped against most currencies after the Reserve Bank of Australia left interest rates unchanged at a record low of 3%. The New Zealand dollar remains little changed against the US dollar.

New Zealand Finance Minister Bill English expressed his surprise in the Kiwi's strength, which would make it a challenge for the country to achieve an export-led recovery, echoing that of Reserve Bank of New Zealand Governor Allan Bollard.

Indicative rates:
EUR/USD 1.4407
USD/JPY 92.69
GBP/USD 1.6375
USD/CAD 1.0955
USD/MXN 13.5570
USD/CHF 1.0580
AUD/USD 0.8479
NZD/USD 0.6917
USD/DKK 5.2101
USD/SEK 7.1863
USD/NOK 6.0314
USD/TWD 32.830
USD/CNY 6.8265
10-Year Treasury: 3.418%
DJIA: 9,411.56 - 85.09