News: FOREX-Dollar gets respite as U.S. manufacturing picks up, jobs report awaited

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
The dollar clung to small overnight gains on Wednesday, edging back from near a five-month trough versus major peers, as a pick up in U.S. manufacturing kept bets alive for a quicker normalisation of Federal Reserve policy.
The dollar index =USD , 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 EUR=EBS traded at $1.2219 after pulling back from near a multi-month top overnight, when it climbed to $1.22545.
Investors were also eyeing the trajectory of China's recently bullish yuan. It was little changed at 6.3823 per dollar in offshore trading CNH=D3 , after retreating from the three-year high of 6.3526 on Monday as policymakers took steps to cool its advance including raising banks' FX reserve requirements.
Sterling GBP=D3 remained lower at $1.41515 after easing off a three-year high of $1.4250 reached on Tuesday, while the Canadian dollar CAD=D3 was at C$1.20675 per greenback after rallying to a fresh six-year peak of C$1.2007 overnight as oil prices 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, as the Fed maintains, or will persist long enough to force policymakers to taper stimulus and raise rates earlier than they have so far signalled, Kadota said.
"Even if inflation continues to overshoot, I think the Fed will continue to say it’s temporary, but the market won't know for sure until fall, so we’re kind of stuck in this uncertainty."
Over the near term, the euro and yuan will be key in determining if the dollar remains on the back foot or stages a rebound, he said.
On Tuesday, the Institute for Supply Management (ISM) said its index of U.S. manufacturing activity rose in May as pent-up demand amid a reopening economy boosted orders.
The dollar initially traded lower on the report, in which ISM said manufacturing's growth potential continued to be hampered by worker absenteeism and temporary shutdowns because of shortages of parts and labour.
Those employment shortcomings will be front and centre of investors' minds on Friday with the release of nonfarm payrolls numbers for May, after April's much-weaker-than-expected reading sent the dollar index slumping 0.7% on May 7.
The index was mostly flat from Tuesday at 89.919, but still well off Friday's high of 90.447, when a measure of U.S. inflation closely watched by the Fed posted its biggest annual rise since 1992.
"I don't think inflation will last long-term," particularly with pressure from higher energy prices starting to dissipate, said Minori Uchida, chief currency analyst at MUFG Bank, who predicts no rate hikes until after 2024.
"I think the dollar will ease toward the end of this year."
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	Currency bid prices at 545 GMT 
 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.2218		$1.2214	 +0.04%		 +0.00%	  +1.2227	 +1.2213 
 Dollar/Yen		JPY=EBS	109.6900	   109.4800	+0.19%		 +6.20%	  +109.7250   +109.5250 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.8973		 0.8972	  +0.04%		 +1.45%	  +0.8976	 +0.8968 
 Sterling/Dollar   GBP=D3	 1.4154		 1.4150	  +0.01%		 +3.58%	  +1.4163	 +1.4147 
 Dollar/Canadian   CAD=D3	 1.2066		 1.2072	  -0.04%		 -5.23%	  +1.2076	 +1.2057 
 Aussie/Dollar	 AUD=D3	 0.7748		 0.7754	  -0.07%		 +0.72%	  +0.7773	 +0.7745 
 NZ				NZD=D3	 0.7245		 0.7253	  -0.12%		 +0.88%	  +0.7272	 +0.7244 
 Dollar/Dollar																				   
All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
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World FX rates	https://tmsnrt.rs/2RBWI5E 
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