The dollar was up on Tuesday morning in Asia as it edged back from near a five-month low. Investors continued to bet the U.S. Federal Reserve will change its stimulus measures sooner than expected after positive economic data was released on Tuesday.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.11% to 89.920 by 1:28 AM ET (5:28 AM GMT).
The USD/JPY pair was up 0.25% to 109.72.
The AUD/USD pair edged down 0.09% to 0.7747 after Australia released a better-than-expected Gross Domestic Product earlier in the day. The GDP rose 1.8% quarter-on-quarter and 1.1% year-on-year for the first quarter of 2021. The NZD/USD pair inched down 0.10% to 0.7248.
The USD/CNY pair inched up 0.06% to 6.3832. Investors continue to monitor the recent bullish yuan after the People’s Bank of China tightened banks’ forex reserve requirements to curb the yuan’s appreciation. The restrictions caused the offshore yuan to retreat from its three-year high of 6.3526 hit on Monday.
"The direction of the dollar is definitely the focus," Shinichiro Kadota, senior currency strategist at Barclays (LON:BARC) in Tokyo, told Reuters, adding that “the market is split in its view.”
Some U.S. Federal Reserve officials insisted that the price pressure will be temporary, while some investors remained concerned that potential runaway inflation will eventually force the central bank to change its current dovish monetary policy earlier than expected.
"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," said Kadota.
In the U.S., data released on Tuesday said the Institute of Supply Management (ISM)
Manufacturing Purchasing Managers Index (PMI) rose 61.2 in May, driven by a boosted demand amid a reopening of businesses. It’s better than the 60.9 figure in forecasts prepared by investing.com and April’s 60.7 reading. However, the data also indicated supply shortages and labor constraints.
Investors now await further U.S. data, including non-farm payrolls, due on Friday for clues on the economic outlook. Its much-weaker-than-expected reading in April led the dollar to slump 0.7% on May 7.