US dollar rises on upbeat US factory data

New York

THE dollar rose against a basket of currencies on Friday, boosted by encouraging US manufacturing data, but remained on track for a weekly loss as traders' concerns about taper talk in US Federal Reserve minutes moderated.

The dollar has given back much of the advance it made after a mention in minutes from the Fed's April monetary policy meeting of possible future discussions on paring back stimulus, raised hopes that US interest rate raises might come earlier than previously thought.

"Taper concerns have faded rather quickly, it would seem," Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

The US currency found some support after data showed that US factory activity gathered speed in early May amid strong domestic demand.

The dollar index, measuring the greenback against a basket of six currencies, was 0.222 per cent higher at 89.993. The index, which hit a four-month low earlier in the session, was on pace for a loss of 0.4 per cent for the week.

Some strategists remain doubtful that the Fed will rush to pull back from its accommodative stance.

"We continue to expect the US dollar to remain soft while US yields remain contained," Mr Osborne said.

Still, continued improvement in US data, especially relative to Europe, is likely to bolster the bull case for the greenback, other analysts said.

"The latest flash PMIs reinforce our view that the economy will continue to grow at a faster pace in the US than in the eurozone in the next few years," said Simona Gambarini, markets economist at Capital Economics.

"This feeds into our forecast that long-dated yields will rise more rapidly in the former than in the latter and that the euro will fall back against the US dollar," she said.

A loosening of Covid-19 restrictions helped surveys of German services activity and French business activity come in better than expected in May, although they had little effect on the euro on Friday.

The British pound fell 0.2 per cent on Friday but was on track for its third consecutive week of gains against the dollar, helped by a series of data releases reinforcing market expectations for a strong economic recovery in the United Kingdom.

Meanwhile, bitcoin slid on Friday after China doubled down on its efforts to prevent speculative and financial risks by cracking down on the mining and trading of the world's largest and most popular cryptocurrency.

Bitcoin traded down 11.5 per cent to 35,952.05. Ether fell 14.3 per cent. REUTERS