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Against that backdrop, the pound and euro rose against the dollar, extending their recent gains.
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The US dollar extended losses against a basket of currencies.
The drop in gold came as the dollar extended its slide to a new annual low against the euro.
US stock futures fell sharply after the PMI report and most Asian stock markets and the Australian dollar extended early losses.
The news prompted suggestions that the Federal Reserve could apply the brakes earlier than expected, and the prospect of higher rates helped the dollar extend its recovery; in New York yesterday it was at a four-month high.
The news pushed Wall Street to a lower opening, and the dollar extended losses against the euro and yen.
The U.S. dollar extended its gains Wednesday against the euro, which drifted downward toward $1.29 after the U.S. government reported a strong rise in new-home sales.
The dollar extended its rally against major counterparts Tuesday after a strikingly strong U.S. retail sales report confirmed recent indications of robust economic recovery.
The dollar extended last week's recovery in technically-driven trade on Monday, hitting a six-week high against the yen and 1-1/2 week peak on the euro as investors refocused short-term on the state of the U.S. economy.
The dollar extended its rally, hitting 106.20 yen, the highest since September 2008.
U.S. Dollar Extends Gains Against Euro, Pound.
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