LONDON, Nov 3: The dollar edged higher against the euro on Monday in volatile trading ahead of the US presidential vote, but gains were limited by mounting fears of recession in the world’s largest economy.

The single European currency in late day trade was at $1.2679 against 1.2750 late Friday in New York.

The dollar was also stronger against the yen, moving up to 99.04 yen from 98.44 on Friday.

Dollar sentiment was dragged down by new report from the US Institute for Supply Management that its purchasing managers’ index, measuring manufacturing activity, fell to 38.9 in October from 43.5 in September, its lowest since September 1982.

“The further collapse in the ISM manufacturing index to a 26-year low of 38.9 in October, from 43.5, confirms that the US economy is now in a severe recession that will be one of the worst in the post-war era,” said analyst Paul Ashworth of Capital Economics.

A third-quarter business survey by the National Association for Business Economics (NABE) found businesses far more negative than in July, “suggesting that the ongoing financial crisis is pulling down the overall economy.” Looking ahead to 2009, 90 per cent of NABE respondents said they were now more pessimistic.

The European Commission, meanwhile, warned that the global financial crisis was pushing the whole European Union into recession.The EU executive arm forecast a short shallow recession for the 27-nation EU, predicting its combined economy would shrink 0.1 per cent in both the third and fourth quarters of 2008.

The forecast also said the economy of the 15 nations that use the euro shrank 0.2 in the second quarter and was set to contract by 0.1 per cent in both the third and fourth quarters.—AFP