NEW YORK: The US dollar index was higher on Wednesday after data showed a surprise pickup in the US services industry in July, which gave the currency further support after hawkish comments from Federal Reserve officials Tuesday.
The Institute for Supply Management said its non-manufacturing PMI rebounded last month from June. The increase ended three straight monthly declines. It also showed supply bottlenecks and price pressures eased, and backed up the view the economy is not in a recession.
The dollar index, which tracks the greenback against six major peers, was last up 0.3% at 106.76. The index had been down slightly heading into the report.
“Yesterday was a big day for the dollar. The Federal Reserve is pushing back on diminishing rate hike expectations, and that’s helped to give the dollar a lift,” said Adam Button, chief currency analyst at ForexLive in Toronto.
The dollar index, which remains up sharply for the year so far, had eased recently as investors began reassessing how aggressive the Fed may be with rate hikes.
But the greenback rallied on Tuesday after a trio of Fed officials signalled the central bank remains “completely united” on increasing rates to a level that will put a dent in the highest US inflation since the 1980s.
US monthly jobs data due on Friday will also help set the tone for the greenback, analysts said.
Against the yen, the dollar was up 0.9% at 134.43 yen.
The yen’s “safe-haven status is eroding,” Button said. “The dollar is both the source of growth and the safe haven. That’s absolutely super charged dollar gains this year, given the state of monetary policy.”
Frictions after the highest-level US visit to Taiwan in 25 years also may help support the US dollar, analysts said. China condemned House of Representatives Speaker Nancy Pelosi’s visit and began six days of military drills surrounding Taiwan, as Pelosi hailed the self-ruled island as “one of the freest societies in the world”.
The euro reversed earlier gains against the dollar and was last down 0.4% at $1.0127. Reports earlier showed monthly drops in both business activity and retail sales in the euro zone.
Sterling also weakened against the dollar. It was last down 0.4% at $1.2108, ahead of a Bank of England policy meeting on Thursday. It is expected to raise rates for the sixth straight time.
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