Dollar narrows losses against euro as US business activity accelerates in May

Dollar narrows losses against euro as US business activity accelerates in May

NEW YORK: The dollar pared losses against the euro after data showed U.S. business activity accelerated to the highest level in just over two years in May, suggesting economic growth accelerated in the middle of the second quarter. .

S&P Global said Thursday that its preliminary U.S. Composite PMI output index, which tracks the manufacturing and services sectors, jumped to 54.4 this month. That was the highest level since April 2022 and followed a final reading of 51.3 in April.

A reading above 50 indicates expansion in the private sector.

“The monetary action shows that the market is still responding to the strong US economic data in the expected manner,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.

“I think the dollar has more room to the upside,” Chandler said.

Data on Thursday also showed that the number of Americans filing new claims for unemployment benefits fell last week, pointing to underlying strength in the labor market that should continue to support the economy.

Federal Reserve officials at their latest policy meeting said they still had faith that price pressures would ease at least slowly in the coming months, but questions were raised about whether the current level of interest rates was high enough. as to guarantee that result and “several” officials said they would be willing to raise borrowing costs again if inflation rose.

“Given the FOMC’s comments, the market continues to overstate the chances of two rate cuts this year,” Chandler said, noting that removing bets on rate cuts would keep the dollar supported in the near term.

The euro rose 0.1 percent to $1.0835. The common currency rose as high as $1.0861 earlier in the session after the preliminary composite purchasing managers’ index for the monetary bloc was above the 50 level that separates growth from contraction for the third consecutive month, and until struggling manufacturing sector showed a recovery.

Better-than-feared economic data in recent months helped the euro recover in April and early May, and Thursday’s data pushed the currency back toward mid-May’s two-month high of $1.0895.

The pound held steady near a two-month high against the dollar at $1.2714, virtually unchanged after Prime Minister Rishi Sunak on Wednesday called a national election, which his Conservatives are expected to lose to the opposition Labor Party after 14 years in power. However, the volatility of sterling options during the period covering the July 4 election increased. (GBP/)

“The market is fairly confident that there will be a Labor government and it is also fairly confident that the Labor government will not be that different in terms of fiscal policy than the current combination of Sunak and (Finance Minister Jeremy) Hunt,” he said. . Jane Foley, head of foreign exchange strategy at Rabobank.

The dollar rose 0.2 percent against the Japanese currency to 157.09 yen after data in May showed Japan’s factory activity entered expansion for the first time in a year.

The corporate sector in Japan has been grappling with the weakness of the yen, and nearly half of Japanese companies view the yen’s decline beyond 155 to the dollar as detrimental to their businesses, about double the percentage of those who see the yen’s decline. currency weakness as a positive, Reuters reported. The survey showed Thursday.

The New Zealand dollar rose 0.3 percent to $0.6115 after data released on Thursday showed retail sales volumes in New Zealand rose unexpectedly, its second day of gains after the Reserve Bank of New Zealand surprised markets on Wednesday by raising its top interest rate forecasts and pulling back when it expects to cut. {AUD/)

Among cryptocurrencies, ether rose 2 percent to $3,807, its highest level since mid-March.

It has been rising amid speculation about the possible approval of US spot exchange-traded funds that would track the world’s second-largest cryptocurrency.