The dollar index rose back above 98 to near April highs in late US trading on Tuesday. The US currency was boosted by comments from Atlanta Fed President Dennis Lockhart who said in an interview for the Wall Street Journal that it would require significant deterioration of the US economy to convince him not to hike rates in September. The dollar had started Tuesday on a softer note and investors were unconvinced from better-than-expected factory orders on signs of underlying weakness in US manufacturing. But it rallied later in the day as dollar sentiment shifted.
The greenback held on to its overnight gains against the euro and the yen. It was trading at 124.39 yen and 1.0869 dollars per euro in late Asian session. But sterling bucked the trend as it rose to 1.5561 dollars from a low of 1.5525 dollars earlier in the session.
In China, stronger-than-expected Services PMI helped lift the mood in Asian markets, which were weighed down by heightened expectations of a September lift-off in US rates. The Caixin/Markit services PMI rose to 53.8 in July from 51.8, the highest level since August 2014.
Crude oil prices continued to advance on Wednesday, rising to $50.66 in late Asian trading. But this provided little support to the Canadian dollar, which was trading near 11-year lows. The greenback touched a new high of 1.3213 against the loonie earlier in Asian session, before easing to 1.3197.
The Australian dollar gave up some of yesterday’s highs as it slipped to 0.7355 against the greenback. While the kiwi was pressured from a rise in the unemployment rate to 5.9% in the second quarter from 5.8%. A 9.3% drop in the global dairy price index on Tuesday also dragged down the currency, which was struggling to stay above 6-year lows against the dollar. The kiwi was holding steady at 0.6527 in late Asian trading.
PMI data will be the main focus for the rest of the day as Eurozone final services PMI and UK services PMI for July are due to be released. The US will also see final services PMI published later today, with the July reading expected to remain unchanged at 55.2. But markets will also be looking at the ADP employment change numbers for July, which could provide an insight into Friday’s jobs data, as well June trade balance and the July ISM non-manufacturing index.