In a report, the Federal Reserve Bank of Richmond said that its manufacturing index fell to 5.0 in December from a reading of 9.0 in November.
Analysts had expected the index to increase to 12.0 in December.
On the index, a reading above 0.0 indicates improving conditions, below indicates worsening conditions.
Following the release of the data, the U.S. dollar was down against the euro, with EUR/USD rising 0.45% to hit 1.3252.
Meanwhile, U.S. stock markets were up after the open. The Dow Jones Industrial Average added 0.2%, the S&P 500 index climbed 0.15%, while the Nasdaq Composite index was little changed.
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