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Dollar Up, China’s Services Sector Grows at Slower Pace in May

ForexJun 03, 2021 01:59AM ET
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© Reuters.

By Gina Lee

Investing.com – The dollar was up on Thursday morning in Asia as investors digested China’s Caixin services data, while awaiting key U.S. economic data for clues on the economic outlook and the U.S. Federal Reserve’s policy decision.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.14% to 90.023 by 1:50 AM ET (5:50 AM GMT).

The USD/CNY pair edged up 0.12% to 6.3882. Investors continue to monitor shifts in Chinese policymakers' stance on the currency after the People’s Bank of China tightened its Banks’ forex requirements earlier this week to curb the yuan’s surge.

Data released earlier in the day said May’s Caixin Services Purchasing Managers Index (PMI) was 55.1, indicating a slower growth rate in the services sector in China.

The USD/JPY pair was up 0.21% to 109.78 as services PMI fell to 46.5 in May in Japan, according to data released earlier in the day.

The AUD/USD pair was down 0.26% to 0.7732 after data released earlier in the day said Australia’s retail sales increased 1.1% month-on-month in April. Across the Tasman Sea, the NZD/USD pair fell 0.28% to 0.7216.

The GBP/USD pair edged down 0.11% to 1.4152 as investors await the U.K.’s services PMI data in May, due later in the day.

Investors are betting on a falling dollar driven by the world’s ongoing economic recovery from COVID-19. However, they remained concerned that the Fed could change its current dovish monetary policy due to a strong economic rebound.

"The major pairs (are) still stuck within ranges," analysts at Singapore's OCBC Bank in a note. However, they added that yield differentials seem to be moving in the dollar's favor and that policymakers' tone is subtly changing.

Fed Governor Lael Brainard’s noting of risks to both sides of the central bank’s goals gave "another signal that the Fed is slowly moving away from its excessively dovish stance... (we) retain the view that Fed expectations should be gradually built in from here, barring any key data misses this week," the note said. 

Remarks from Brainard earlier in the week noted risks to both sides of the Fed's goals offered "another signal that the Fed is slowly moving away from its excessively dovish stance," the note added.

The Fed said on Wednesday that it plans to start gradually sell a portfolio of corporate debt purchased through an emergency lending facility that it launched in 2020, indicating the beginning of policy change.

Investors now await key U.S. economic data including initial jobless claims, due later in the day, for clues on the economic outlook. Further data include non-farm payrolls, released on Friday, which posted weaker-than-expected monthly hiring in April.

"Given last month's disappointing report, the risk is the results deliver another downside surprise and bears down on the dollar," Commonwealth Bank of Australia (OTC:CMWAY) analyst Carol Kong told Reuters.

Across the Atlantic, investors will focus on the European Central Bank meeting, scheduled for the following week, for clues on whether policymakers will pare back their bond-buying program.

Dollar Up, China’s Services Sector Grows at Slower Pace in May
 

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