TOKYO- The dollar clung to small gains from overnight on Wednesday, edging back from near a five-month trough versus major peers, as a pick up in US manufacturing kept bets alive for a quicker normalization of Federal Reserve policy.
The dollar index, which measures the greenback against six rivals, hovered just below 90 after dipping to as low as 89.662 on Tuesday and approaching the lowest since Jan. 7 at 89.533.
Likewise, the euro traded at $1.2222 after pulling back from near a multi-month top overnight, when it climbed to $1.22545.
Investors were also watching out the trajectory of China’s recently bullish yuan. It was last at 6.3798 per dollar in offshore trading, after retreating from the three-year high of 6.3526 reached on Monday as policy makers took steps to cool its advance including raising banks’ FX reserve requirements.
Sterling also remained lower at $1.4160 after easing off a three-year high of $1.4250 reached Tuesday, while the Canadian dollar was at C$1.20590 per greenback after rallying to a fresh six-year peak of C$1.2007 overnight as oil rose.
“The direction of the dollar is definitely the focus,” said Shinichiro Kadota, senior currency strategist at Barclays in Tokyo.
“The market is split in its view” on whether current inflationary pressures will be transitory, like the Fed says it is, or persist long enough to force policy makers to taper stimulus and raise rates earlier than they have so far signalled, Kadota said. — Reuters
