Dollar retreats after Friday’s surge as US data disappoints


NEW YORK: The dollar fell against a basket of currencies on Monday, giving up some of the ground gained in the previous session as Treasury yields retreated and poor data weighed on the US dollar.

Manufacturing activity in the United States grew at a slower pace in April, likely limited by input shortages amid pent-up demand, unleashed by rising vaccinations and a massive fiscal stimulus.

The dollar index, measuring the greenback against a basket of six currencies, fell 0.4% to 90.88, falling back to Thursday’s two-month low despite a 0.7% increase in Friday month-end flow.

“The sharp rise in the US dollar last Friday dampened the currency’s selloff, but we are not yet convinced that a stronger and wider rebound – corrective – is to be expected,” said Shaun Osborne, strategist in Head of Foreign Exchange at the Bank Note.

“It would take significant additional gains this week to tip the risk towards a rally in the USD and its early form is not promising,” Osborne said.

Bearish sentiment towards the dollar is on the rise after a brief pullback. The US dollar’s net short positioning rose this week to its highest level since late March, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.

The dollar fell against the euro on Monday after a survey showed growth in eurozone factory activity hit an all-time high in April, boosted by booming demand and leading to higher new hires, although supply constraints have led to an unprecedented rise in unfulfilled orders.

Comments from Luis de Guindos, vice-president of the European Central Bank, also helped the euro. The ECB can start phasing out emergency stimulus measures when the pace of coronavirus vaccinations hits a critical level and the economy picks up speed, he told an Italian newspaper.

Trading in the forex markets was brightened by vacations in Japan, China and Britain, which limited volatility.

The Australian and New Zealand dollars were firmer on Monday, but not enough to fully recover from Friday’s losses.

Forex traders will look at labor market data later this week to read the health of the US economic recovery and assess how the US Federal Reserve might respond to improving data.

Federal Reserve Chairman Jerome Powell is due to speak later Monday and will be followed by a series of Fed officials this week. Central bank policy meetings are also scheduled this week in Australia, Britain and Norway.

In the crypto markets, Ethereum broke above $ 3,000 to post a new high of $ 3,203.18.


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