US dollar languishes near 1-week low after weak US manufacturing activity

[SINGAPORE] The US dollar traded near a one-week low versus a basket of major currencies on Tuesday, having come under pressure after a surprisingly soft US manufacturing report.

The New York Federal Reserve said on Monday its barometer on business activity in New York state unexpectedly fell in May, sinking into negative territory for the first time since October.

Analysts cautioned that the downturn could be a harbinger of possible deterioration in the manufacturing sector.

The US dollar index, which measures the greenback's value against a basket of six major currencies, last traded at 98.855 . On Monday, it touched a low of 98.787, its weakest level since May 8.

On the whole, Teppei Ino, analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore, said the weak reading on New York manufacturing activity hasn't substantially altered the positive sentiment toward the US economy.

"I think people want to wait and see," Mr Ino said, adding the general view seems to be that the US economy is still holding firm.

The euro edged up 0.1 per cent to US$1.0984 after gaining 0.4 per cent on Monday.

The single currency is now within sight of a six-month high of US$1.1024 set last week, when it rose on a relief rally after centrist Emmanuel Macron was elected France's president.

The US dollar eased 0.1 per cent against the yen near 113.71, after rising 0.4 per cent on Monday.

The greenback has risen more than 1.9 per cent against the yen so far this month, as risk sentiment improved after France's presidential elections and focus shifted back towards the outlook for monetary policy.

Market expectations for the Federal Reserve to raise interest rates in June have helped underpin the US dollar recently.

"If strength in equities or rises in yields around the world continues, that will probably result in a supportive environment for the dollar against the yen," said Shinichiro Kadota, senior FX strategist for Barclays in Tokyo.

The Australian dollar rose 0.2 per cent to US$0.7428, staying on a firm footing after getting a boost on Monday, when oil prices jumped about 2 per cent.

REUTERS