SYDNEY: The US dollar nursed broad losses early on Wednesday, having retreated from a multi-month peak as bulls got cold feet after U.S. manufacturing contracted in November for the first time in three years.
The dollar index stood at 99.779, skidding below an 8-1/2-month high of 100.310 set on Monday. It had rallied 3.3 percent last month on expectations that the Federal Reserve would hike U.S. interest rates at its Dec. 15-16 policy review.
Prompting investors to trim bullish USD positions was the closely watched ISM survey, whose national factory index fell to 48.6 as the sector buckled under the weight of a strong dollar and deep spending cuts by energy firms.
Also tempering sentiment, Chicago Fed President Charles Evans was at pains to emphasize the need for the U.S. central bank to spell out a gradual pace of rate hikes.
"We have been cautious about extending USD long positions ahead of the Fed, wary that the USD could give back ground if the Fed stresses caution and FX headwinds in their press conference," analysts at BNP Paribas wrote in a note to clients.
Against the yen, the greenback stepped back to 122.87 yen from Monday's high of 123.34. It remained in consolidation mode against its Japanese peer since hitting a three-month high of 123.77 in mid-November.
The embattled euro popped above $1.0600, rebounding from a 7-1/2-month trough of $1.0557. It was last at $1.0635 but further upside may be limited ahead of the European Central Bank's policy review on Thursday, where markets are expecting fresh stimulus measures.
Among the best performers overnight were the Australian and New Zealand dollars. Both Antipodean currencies rallied more than 1 percent against the greenback.
With momentum already on its side, the Aussie was further aided by a 'chilled out' central bank, which skipped a chance on Tuesday to cut interest rates or talk down the currency afresh.
The Aussie climbed above 73 U.S. cents for the first time in over a month, while the kiwi came just shy of 67 U.S. cents, its highest since early November.
In contrast, investors dumped the Canadian dollar after the country's economic activity in September fell by a worse-than-expected 0.5 percent, driven by the decline in the oil and gas industry after a temporary production disruption.
The loonie fell to a 1-1/2-week low of C$1.3398 per USD , but has since recovered to be just a tad softer at C$1.3358.
Australia's own gross domestic product data will come in focus next, as will a speech by Reserve Bank of Australia Governor Glenn Stevens.
Economists polled by Reuters expect quarterly GDP growth to pick up to 0.8 percent from 0.2 percent, thanks largely to a surge in exports.
Stevens will talk about 'Economic Conditions and Prospects' and is likely to take the 'glass-half-full' perspective as usual. However, he also has an opportunity to raise any concerns about the resilience of the Aussie.
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