The dollar edged higher on Tuesday against a basket of comparable currencies after US manufacturing data showed a stronger-than-expected recovery in activity, even as labor shortages and commodity shortages weighed in on production.
NEW YORK: The dollar edged up against a basket of comparable currencies on Tuesday after US manufacturing data showed a stronger-than-expected recovery in activity, even as labor shortages and material shortages firsts weighed on production.
The Institute for Supply Management (ISM) said its index of manufacturing activity in the United States rose in May as pent-up demand amid a reopening economy boosted orders.
The dollar initially traded lower on the report, in which ISM said the growth potential of the manufacturing sector continued to be hampered by worker absenteeism and temporary closures due to shortages of parts and labor. -work.
The report suggests that supply issues in the manufacturing sector are having an impact on the economy as a whole, said Kathy Lien, chief executive of BK Asset Management.
“It also tells us that the momentum we saw at the start of the second quarter may start to slow down.”
The dollar index climbed 0.35% to 89.822, but was far from Friday’s high of 90.447, when a measure of US inflation closely watched by the Federal Reserve recorded its biggest annual increase since 1992.
The market bias is generally in favor of a weaker dollar, said Vassili Serebriakov, FX and macro strategist at UBS.
“The global recovery outside the United States which was lagging in the first quarter due to slow immunizations has now accelerated, especially in places like the euro zone and the United Kingdom,” he said. he said about recent dollar weakness.
Warmongering signals from central banks in some G10 countries, including Canada, Norway and New Zealand, have also increased pressure on the greenback, he said.
The British pound hit a three-year high of US $ 1.425 during the Asian session, aided by remarks from a Bank of England politician last week indicating a rate hike next year or more early.
The euro climbed 0.05% to US $ 1.2305, following data showing eurozone inflation exceeded the European Central Bank’s target in May.
“The value of the inflation data for the next quarter is completely riddled with base effects and other temporary factors, so it is very difficult for markets and policymakers to suppress the signal of this noise,” Simon said. Harvey, FX analyst at Monex Europe.
Commodity-linked currencies were generally stronger than the dollar as oil prices rose on expectations of rising demand for fuel.
The Organization of the Petroleum Exporting Countries and its allies – known collectively as OPEC + – agreed on Tuesday to stick to the current pace of gradual easing of oil supply restrictions, as producers balanced the anticipation of a recovery in demand against a possible increase in Iranian supply.
The Canadian dollar hit a six-year high of 1.2010 per greenback, helped by strength in oil, and data that showed Canada’s first quarter economic growth remained robust.
The Australian dollar rose 0.45% to 0.77625.
Australia’s central bank left its cash rate at an all-time high and reiterated its policy of lowering it for longer, even though data showed the country’s output was above its pre-pandemic level.
The Chinese yuan remained stable after authorities ordered banks to increase their foreign exchange reserve ratio, a move seen as an attempt to limit the rapid appreciation of the yuan.
The offshore yuan was at 6.3817, up 0.11% on the day.
In cryptocurrencies, bitcoin fell 2.66% to US $ 36,348.78, while ether fell 1.21% to US $ 2,566.90.
(Reporting by John McCrank in New York; additional reporting by Elizabeth Howcroft in London; Editing by Bernadette Baum and Mark Heinrich)