© Reuters. FILE PHOTO: A U.S. Dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration/File Photo/File Photo
By Joice Alves
LONDON (Reuters) -The dollar remained under pressure on Monday, falling to a three-year low versus the yuan as economic activity data showed that China’s recovery had slowed but remained on a strong footing.
The Chinese economy has largely shaken off the gloom from the COVID-19 pandemic. Its factory activity growth slowed slightly in May as raw materials costs grew at their fastest pace in over a decade.
The changed hands at 6.3553 per dollar, its highest since May 2018, even if analysts pointed that Chinese authorities appeared to be keen to want to curb its rise.
U.S. price data on Friday drove the greenback higher against a basket of currencies, but the dollar slipped on Monday as investors weighed the likelihood of the impact of rising price pressures and a dovish Fed on U.S. assets.
U.S. consumer prices surged in April. The core PCE price index vaulted 3.1%, the largest annual gain since July 1992, due to a recovery from the pandemic and various supply disruptions.
The market considers the current inflation levels to be transitional, while next year U.S. inflation will then remain at 2.5%, Ulrich Leuchtmann, Commerzbank’s head of FX and commodity research wrote in a note.
“That does not make it any easier pricing USD,” he said. “Until we have more clarity the dollar is likely to have found a good balance at current levels”.
The dollar is on track for its second consecutive month of loss against a basket of currencies. It was down 0.1% at 90.027 at 0820 GMT.
Versus the Japanese yen, the dollar held near a two-month high after a key measure of U.S. inflation showed stronger price gains than expected, keeping alive expectations of an eventual tapering in the Federal Reserve’s asset buying.
The dollar edged 0.2% to 109.70 yen and stood not far from Friday’s peak of 110.20, its highest since early April.
The euro was flat at $1.216, off Friday’s low of $1.2133. The British pound also barely moved at $1.4176.
In cryptocurrencies, bitcoin was 1.1% higher at $36,069. Ether rose 3.4% to $2,468.
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