Dollar rose against a basket of currencies except the Japanese yen on Monday as stocks declined across the globe, leading investors to cut exposure to risk. Although the New York Federal Reserve Bank indicated that its Empire State manufacturing activity index rose in August to 12.08 (much higher than the expectation of 3.0) from -0.55 in July, it could not reverse investors’ concerns over the U.S. economic recovery. U.S. net overall capital outflows was $31.2 billion in June, following a $65.70 billion outflow in May. U.S. Treasury International Capital System showed that China cut Treasury holdings in June by the biggest percentage in nearly nine years although long-term capital flows in June were up 90.7 billion, compared to the May decline of 19.4 billion (revised from a decline of 19.8 billion) as Japan and the U.K. increased demand.

The single currency hit a two-week low at 1.4045 against the greenback in New York morning as concerns about recent stock gains outpaced prospects of an economic recovery and increased demand for the dollar as a safe-haven asset. Eurozone trade balance in June came out at 4.6 billion euros compared to consensus forecast of 3.0 billion and the reading of 2.1 billion in the prior month. The market reaction to this data was somehow muted. DJI closed down 186 points or 2.00%, Nasdaq tumbled 54.7 points or 2.75% and S&P dropped 24.39 points or 2.43%.

The British pound fell to a one-month low of 1.6275 against the dollar in late European trade. The pound was dented by an earlier survey showing a drop in U.K. house prices, signaling the recession may still have some way to go and highlighting the U.K. economy recovery may not be as strong as previously estimated. Rightmove Plc said the average cost of a home declined 2.2% in August after gaining 0.6% in July. A tumble in European stock markets (FTSE100 closed down 1.5%, DAX and CAC dropped more than 2%) also weighed on sterling.

Earlier in the day, data showed that Japan’s gross domestic product grew 0.9% in Q2 for the first time in five quarters, signaling Japan’s economy had come out of recession. The Japanese strengthened against higher-yielding currencies with gbp/jpy tumbling from 156.54 to 153.48, eur/jpy dropping from 134.50 to 132.51 and aud/jpy falling from 78.80 to 77.07.

Elsewhere in the markets, the Australian dollar, New Zealand dollar and Canadian dollar, known as the three commodity currencies, slipped versus the greenback as U.S. crude oil futures dropped to around $66 per barrel and spot gold price fell over 1% to as low as $930.50/ounce. Aud/usd declined from 0.8318 to 0.8156, nzd/usd slid from 0.6763 to 0.6644 while usd/cad rose from 1.0994 to 1.1126 before stabilising.

Data to be released on Tuesday include Australia RBA meeting minutes, Japan leading indicators; U.K. CPI and RPI.; German and eurozone ZEW index; U.S. building permits, housing starts and PPI.