Dollar recovers from 13-month low on strong PMI readings, Asia stocks subdued

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SINGAPORE (Reuters) – The dollar crept up from a 13-month low on Tuesday after stronger-than-expected readings on U.S. factory and services activity ahead of the start of a Federal Reserve meeting later in the day, but Asian stocks were subdued.

The dollar and U.S. Treasury yields rose on expectations the Fed will say it will begin reducing its bond portfolio at its September meeting.

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, rose 0.1 percent to 94.078 on Tuesday, after earlier revisiting its lowest level since June 2016, first hit on Monday.

The dollar rose 0.15 percent to 111.29 yen JPY=D4 early on Tuesday, after touching a six-week low on Monday.

The 10-year U.S. Treasury yield US10YT=RR rose to 2.257 percent early on Tuesday, up from last week’s close of 2.232 percent.

On Monday, Markit’s manufacturing and services flash surveys both showed the U.S. economy beating expectations, while euro zone business growth at the start of the second half of the year slowed.

The euro EUR=EBS, which posted losses on Monday after earlier hitting a near-two-year high, extended losses a touch on Tuesday to trade at $1.16385.

“(U.S.) Markit Purchasing Managers Index data beat expectations to show growth potential whilst European PMI’s fell slightly below expectations to help soften the euro,” said Matt Simpson, senior market analyst at ThinkMarkets in Melbourne.

“Yet, as Europe’s business surveys continue to outperform those of the U.S., last night was a minor victory at best for the greenback,” he added. “The expectation of a slightly dovish Fed and a White House seemingly in turmoil is likely to weigh further on the greenback for the foreseeable future.”

Jared Kushner, President Donald Trump’s son-in-law and senior advisor, told Senate investigators on Monday he had met with Russian officials four times last year but said he did not collude with Moscow to influence the 2016 U.S. election.

The ongoing probes into the Russia matter by congressional panels and a Justice Department special counsel, as well as weak U.S. economic data and reduced inflation expectations, have weighed on the dollar for much of the month.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was flat in early trade, with a number of markets looking for fresh impetus after hitting multi-year highs in recent weeks.

Japan’s Nikkei .N225 rose 0.3 percent and Australian stocks jumped 0.35 percent, making up some of Monday’s 0.6 percent slide.

South Korea’s KOSPI .KS11 was little changed.

Overnight on Wall Street, the Nasdaq .IXIC set a new all-time high as investors bet on solid earnings from technology companies. The S&P 500 .SPX and the Dow .DJI closed in negative territory, following European stocks , which lost 0.2 percent.

In commodities, oil prices continued their recovery on a pledge by leading OPEC producer Saudi Arabia to cut exports in August to help reduce the global crude glut. Haliburton Co’s (HAL.N) executive chairman also said the U.S. shale drilling boom would probably ease next year.

U.S. crude CLc1 rose 0.1 percent to $46.40 a barrel, after closing up 1.25 percent on Monday.

Global benchmark Brent LCOc1 added 0.2 percent to $48.71, extending Monday’s 1.1 percent rise.

The dollar’s recovery weighed on gold XAU=, with the precious metal losing 0.1 percent to $1,253 an ounce.

Reporting by Nichola Saminather; Editing by Kim Coghill

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