The US economy "withstood" Powell, was more resilient than other economies in the world, and the dollar rose strongly

The dollar rallied against a basket of currencies on Tuesday as a slew of new economic data highlighted the strength of the U.S. economy relative to Britain and the European Union.

Standard & Poor's Global said Tuesday that manufacturing shrugged off a five-month contraction as new orders picked up, U.S. business output edged higher in October and service sector activity picked up modestly amid signs of easing inflationary pressures.

It is the latest sign that the US economy has weathered a surge in interest rates, spurred on by the Federal Reserve's efforts to curb inflation.

The dollar index, which measures the greenback's strength against a basket of six currencies, rose 0.6 per cent to 106.19 after falling to a one-month low of 105.35 earlier in the day.

Helen Give, currency trader at Monex USA, said: "The overall picture is clearly still intact, especially when you compare the US PMI to the data released this morning for both the UK and the euro area." While all three purchasing managers' indices in the US - manufacturing, services and composite - were positive, both the UK and the euro area contracted, re-emphasizing the continued resilience of the US economy relative to the rest of the world. "

Earlier on Tuesday, survey data showed that business activity in the euro zone unexpectedly showed the worst of the month, with the entire region plunging into a general downturn, suggesting that the euro zone may be in recession.

The euro reversed course and finally fell 0.7% to $1.05975.

Data were particularly bleak in Germany, where surveys of purchasing managers' indices showed that services were in contraction territory, along with manufacturing.

Global financial marekts have been hit by a surge in US bond yields, with the yield on the all-important 10-year note rising above 5 per cent on Monday, its highest level since July 2007. The rise in yields has pushed the dollar index to nearly 1 per cent. This month starts at a new high for next year.

Yields fell sharply late Monday. Analysts said a message on social media by prominent hedge fund investor Bill Ackman was a catalyst, saying he had been in a position squaring bets to short long-term bonds and that geopolitical concerns were a factor. As prices fall, yields rise and vice versa.

USD/JPY finally rose 0.1% to 149.875, which made traders nervous about possible government intervention to support the yen.

Sterling fell 0.59 per cent to $1.21,765 after a survey on Tuesday showed British business activity had fallen again this month and cost pressures had cooled further, highlighting the risk of a recession.

The Bank of England will decide on interest rates next Thursday, following the Federal Reserve's decision on Wednesday. The European Central Bank meeting ends on Thursday, and traders expect the three central banks to keep rates steady.