* Dollar index rises after upbeat manufacturing data
* Aussie dollar falls after recession confirmed
* Euro falls back below $1.19
* Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E
LONDON, Sept 2 (Reuters) - The dollar extended overnight gains after positive U.S. manufacturing data, while the Australian dollar took a hit when GDP data on Wednesday confirmed the country is in recession for the first time in three decades.
Manufacturing activity in the United States increased more than expected in August, with new orders surging.
But factory employment - which was already in decline before the coronavirus because of the Trump administration’s trade war with China - continued to lag, in line with economists’ view that the labour market’s recovery is running out of steam.
The dollar, which has been on a losing trend, rose against a basket of currencies, steadying overnight then extending gains in early London trading. It was up 0.3% at 92.511 at 0712 GMT .
The news also pushed up Asian shares overnight, with European indexes also opening higher.
Commerzbank analyst Thu Lan Nguyen said that, although the long-term economic fallout from coronavirus is unknown, it is countries’ relative economic performance that drives exchange rates - in addition to monetary policy developments.
“The U.S. dollar was able to benefit from significantly improved ISM data yesterday which suggest a continued high-speed recovery, thus increasing the likelihood that the U.S. might be able to overcome the crisis comparatively better after all,” she wrote in a note to clients.
“The ADP data and factory orders today are likely to provide additional momentum for the U.S. currency short-term if these sets of data turn out similarly positive,” she said, referring to data releases at 1215 GMT and 1400 GMT, respectively.
Risk currencies were mixed: the Norwegian crown was down 0.2% versus the dollar while the Swedish crown and kiwi dollar were little changed on the day.
The Riksbank’s deputy governor, Per Jansonn, is due to speak on the economic situation at 1000 GMT.
The Norges Bank’s deputy governor Ida Wolden Bache will speak in a webinar, also at 1000 GMT.
The Aussie dollar fell after worse-than-expected Australian GDP data confirmed the country’s economy shrank 7% in the three months to June, putting it in its first recession in nearly three decades.
At 0716 GMT, it was at 0.73525 versus the U.S. dollar , having recovered some losses but still down 0.3% on the day.
The euro, which on Tuesday rose above $1.20 for the first time since 2018, edged back down below $1.19. At 0721 GMT, it was at $1.18785, down 0.3% since the previous session’s New York close.
The euro showed no reaction to a slowdown in inflation on Tuesday, but analysts said it raises problems for the European Central Bank going forward.
German retail sales fell unexpectedly, down 0.9% in July, missing a Reuters forecast for a 0.5% increase and countering hopes that household spending could drive a strong recovery from the coronavirus shock.
The spread of COVID-19 continues to limit activity, with Poland set to ban direct flights from 44 countries, including Spain, Israel and Romania.
In the United States, there remain “serious differences” between Democrats and the White House over proposed government aid. (Reporting by Elizabeth Howcroft; Editing by Christopher Cushing)
Our Standards: The Thomson Reuters Trust Principles.