Forex - U.S. dollar up sharply, extending gains after ISM manufacturing data

LONDON (Thomson Financial) - The U.S. dollar was up sharply, extending earlier gains after a better-than-expected survey on U.S. manufacturing activity.The ISM manufacturing index held steady at 48.6 in April, still below the 50 level to signal continued contraction in the sector but beating forecasts for a decline to 48.0.The release gave market players further excuse to buy the U.S. dollar, taking the euro to a five-week low of $1.5440."The report was a real mixed bag, providing no fundamental basis for buying the greenback. Nonetheless, players used the report as an excuse to extend the overnight dollar rally," said Michael Woolfolk at the Bank of New York Mellon.The U.S. dollar has been gaining since last night's decision by the Federal Reserve to cut interest rates by 25 basis points, marking a departure from the aggressive monetary easing of recent months and prompting optimism that the worst of the credit crisis may be over."A lot of people believe the worst is over and the perception is that this will be the end of the rate cuts," said Mic Mills, a trader at TradIndex.com.Attention Friday will turn to the release of key U.S. jobs data, where another better-than-expected reading will allow the U.S. dollar to extend its gains further."If non-farm payrolls surprises tomorrow on the upside, the resulting dollar rally has more potential than recent history suggests," BNY Mellon's Woolfolk said.London 1519 GMT London 1106 GMTU.S. dollar yen 104.08 up from 104.03 Swiss franc 1.0490 up from 1.0440 EuroU.S. dollar 1.5439 down from 1.5533 pound 0.7819 unchanged yen 160.71 up from 161.60 Swiss franc 1.6196 down from 1.6220 PoundU.S. dollar 1.9746 down from 1.9862 yen 205.51 down from 206.60 Swiss franc 2.0707 down from 2.0733 Australian dollar U.S. dollar 0.9322 down from 0.9377 pound 0.4720 unchanged yen 96.98 down from 97.50