Early trade in New York: Dollar softens after manufacturing data

NEW YORK: The dollar softened on Tuesday, edging toward five-month lows after data showed that while US manufacturing activity picked up last month, unfinished work piled up due to shortages of raw materials and labour.

The Institute for Supply Management (ISM) said its index of national factory activity increased more than expected in May from April, but that shortages of raw materials, such as semiconductors, and a lack of workers, weighed on production.

The dollar index was down 0.124% at 89.68, having risen as high as 90.447 on Friday, when a measure of US inflation closely watched by the Fed posted its biggest annual rise since 1992.

Britain’s pound hit a three-year high of $1.425 during the Asian session, helped by remarks from a Bank of England policymaker last week pointing to a rate hike next year or sooner. The euro edged up 0.17% to $1.2246, following data that showed euro zone inflation surged past the European Central Bank’s target in May.

Commodity-linked currencies were generally stronger versus the dollar, as oil prices rose on expectations for growing fuel demand. The Canadian dollar touched a six-year high, up 0.3% at 1.2010 per greenback, helped by the strength in oil, and data that showed Canada’s economic growth in the first quarter remained robust.

The Australian dollar was up 0.39% at 0.77575.

China’s yuan was steady after authorities ordered banks to increase their foreign exchange reserve ratio, a move seen as an attempt to limit the fast appreciation of the yuan.

The offshore yuan was at 6.3803, up 0.09% on the day.

In cryptocurrencies, bitcoin was down 1.76% at $36,683.89, while ether edged 0.29% higher to $2,606.07.

Looking forward, the US jobs report for May is due on Friday.