Capitulation, interrupted. The dollar was in a free-fall to historic lows yesterday, until the ISM manufacturing supply managers’ survey arrested its fall. But the fear about the US economy that was implicit in the dollar, and in historic highs for commodities from gold to oil through soybeans, will not be banished that easily.

To understand how bad things were, note that the ISM figure was dreadful by any usual standard. It fell to 48.3, its lowest since 2003, and any number below 50 indicates a contraction in activity.

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John Authers on the fall of the US dollar

It can only be viewed as positive news because it went below 40 in the recession of 1991, and got to 41 in 2001, and because regional surveys had suggested it could be even worse.

It does not unambiguously foretell a recession. Sentiment had been so negative, that that was enough to trigger a bounce.

The attack on the dollar was universal. The dollar’s trade-weighted index has treated 80 as an invisible barrier, only once falling below it, for a matter of days, during the European exchange rate mechanism crisis of 1992. Yesterday, it dropped below 73.4.

Warren Buffett’s favourite currency, the Brazilian real, is buoyed by sky-high commodity prices and by high domestic interest rates. But even the Swiss franc – which tends to be sold short to allow “long” positions against commodity currencies like the real – hit an all-time high against the dollar. The Japanese yen is at a three-year high.

This implies that debt markets have been right, and equities wrong, in recent weeks. There was for a while an argument that debt’s problems were down to liquidity problems in the debt market, and so stocks did not need to follow credit down. But now both the bond market and foreign exchange show acute concern for the US economy. Stocks may have no choice but to move lower.