Greenback holds gains as US manufacturing picks up

London

THE US dollar clung to minor gains on Wednesday, edging up from near a five-month trough versus major peers, as a pick-up in US manufacturing kept bets alive for a quicker normalisation of Federal Reserve policy.

The dollar index, which measures the greenback against six rivals, hovered just below 90 after dipping to as low as 89.662 on June 1 and approaching the lowest since Jan 7 at 89.533.

The euro traded at US$1.22 after pulling back from near a multi-month top overnight, when it climbed to US$1.22545.

Investors were also eyeing the trajectory of China's recently bullish yuan. It was little changed at 6.3823 per dollar in offshore trading, after retreating from a three-year high of 6.3526 on May 31 as policymakers took steps to cool its advance, including raising banks' FX reserve requirements.

Sterling remained lower at US$1.4135 after easing off a three-year high of US$1.4250 reached on June 1, while the Canadian dollar traded at C$1.20675 per greenback after rallying to a fresh six-year peak of C$1.2007 overnight as oil prices rose.

On June 1, the Institute for Supply Management (ISM) said its index of US manufacturing activity 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 manufacturing's growth potential continued to be hampered by worker absenteeism and temporary shutdowns because of shortages of parts and labour.

Those employment shortcomings will be front and centre of investors' minds on Friday with the release of non-farm payroll numbers for May, after April's much weaker than expected reading sent the dollar index slumping 0.7 per cent on May 7.

The index was mostly flat from June 1 at 89.919, but still well off May 28's high of 90.447, when a measure of US inflation closely watched by the Fed posted its biggest annual rise since 1992.

Elsewhere in currencies, the Australian and New Zealand dollars fell, down 0.4 per cent and 0.5 per cent respectively against the greenback.

The New Zealand dollar traded at US$0.7216 against the US dollar, and the Aussie was last at US$0.7724.

Cryptocurrency Bitcoin traded one per cent higher, just above the US$37,000 mark, while Ether traded 1.5 per cent higher at US$2675.71. REUTERS