Investing.com - The pound held on to modest gains against the broadly softer dollar on Monday, but remained close to eight-and-a-half month lows after data showing that activity in the U.K. manufacturing sector continued to slow at the end of 2015.
GBP/USD was up 0.23% to 1.4770, after falling to overnight lows of 1.4692, the weakest level since April 14.
The Markit manufacturing purchasing managers' index fell to a three-month low of 51.9 from 52.5 in November, compared to forecasts for an uptick to 52.7.
New export orders rose at the slowest rate in five months, the report said while factory gate prices fell for the fourth straight month.
"The UK manufacturing sector ended 2015 on a disappointing note, with its rate of growth slowing further from October's recent high back down towards the stagnation mark," Rob Dobson, senior economist at Markit, said.
"Although this would be an improvement on the second and third quarters, it does also suggest that manufacturing output over 2015 as a whole may be below the level achieved in 2014."
The dollar remained on the back foot as heightened tensions in the Middle East and weak data out of China boosted investor demand for the safety of the yen and the Swiss franc.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.55% to 98.22.
The index ended 2015 with gains of 8.96% bolstered by the diverging monetary policy stance between the Federal Reserve and other world central banks, particularly the European Central Bank and the Bank of Japan.
The drop in the dollar came after Saudi Arabia cut diplomatic relations with Iran on Sunday after protesters stormed the Saudi embassy in Tehran following the execution of prominent Saudi Shia cleric Sheikh Nimr al-Nimr.
Meanwhile, equity markets in Asian and Europe were hit after data from China showing that manufacturing activity contracted for the tenth straight month in December, adding to fears over slowing growth in the world’s second-largest economy.
Investors were looking ahead to the ISM report on U.S. manufacturing activity later in the day.