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Upbeat data lifts US$; trade doubts linger

New York

THE US dollar shook off early weakness to advance against a basket of currencies on Friday, after data showed that US factory and services activity quickened in November in a sign of the continued resilience of the US economy.

IHS Markit said its "flash" purchasing managers index (PMI) for manufacturing rose to 52.2 in November from a final reading of 51.3 in October, while its preliminary services PMI increased to 51.6 this month from 50.6 last month.

The dollar index, which compares the dollar against six major currencies, was up 0.24 per cent at 98.23.

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Helping the dollar's strength was a survey which showed eurozone business growth almost ground to a halt this month as activity in the bloc's dominant services industry increased at a much weaker pace than expected and among manufacturers it contracted again.

The common currency fell 0.28 per cent against the greenback.

"That combination is what is pulling the dollar a little higher," said Vassili Serebriakov, an FX strategist at UBS in New York.

Despite the rise on Friday, the dollar has remained largely range-bound over the last few sessions. For the week, the dollar index is up 0.24 per cent.

Mixed messages on the US-China trade deal last week kept investors from taking on any large directional positions ahead of the Thanksgiving holiday.

Chinese President Xi Jinping said Beijing wants to work out a deal with Washington and has been trying to avoid a trade war - but is not afraid to retaliate when necessary.

A senior Chinese diplomat urged the US to compromise in order to develop stable relations between the countries, saying that some US politicians were trying to push the countries into confrontation.

Meanwhile, volatility in the currency market has plunged in recent days with the Deutsche Bank FX Volatility Index slipping to 5.86, its lowest since mid-July.

"The dollar is relatively expensive but I think the market is really looking for signs of a stronger global growth rebound to revive interest in some of the currencies outside of the US but the messages that we are getting are still a bit mixed, both in terms of the PMIs and the news on trade," said Mr Serebriakov.

Elsewhere, the pound dived on Friday and was on pace for a weekly loss after surveys showed British business suffered its deepest downturn since mid-2016, with caution rising before a Dec 12 general election. The pound was 0.6 per cent lower at US$1.2836. REUTERS