Dollar gains ground vs. yen, lower vs. euro

The dollar was higher against the yen on Monday and was broadly lower against the other major currencies, despite speculation that the Federal Reserve will soon start to pull back its asset purchase program.

During European late morning trade, the dollar climbed to three-and-a-half week highs against the yen, with USD/JPY rising 0.39% to 99.52.

Earlier Monday, the Bank of Japan’s quarterly business sentiment index showed a strong jump in optimism among large manufacturers in the three months to June, adding to the view that the economy is picking up.

Investors were awaiting Friday’s U.S. nonfarm payrolls data as speculation over how soon the Fed will start to unwind its USD85 billion-a-month bond buying program continued.

Elsewhere, the dollar was lower against the pound, with GBP/USD up 0.15% to 1.5230 after data showed that manufacturing activity in the U.K. expanded at the fastest pace in more than two years in June.

Markit said that its U.K. manufacturing purchasing managers’ index rose to a seasonally adjusted 52.5 in June from an upwardly revised reading of 51.5 in May.

Analysts had expected the manufacturing PMI to hold steady at 51.5 last month.

The euro was close to session highs against the dollar, with EUR/USDclimbing 0.28% to 1.3046.

In the euro zone, official data showed that the unemployment rate ticked up to 12.1% in May from 12% in April, compared to expectations for a reading of 12.3%.

Another report showed that consumer price inflation in the euro zone rose to 1.6% in June from 1.4% in May, in line with expectations.

The dollar edged higher against the Swiss franc, with USD/CHF inching up 0.06% to 0.9454. 

The greenback was broadly lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD up 0.51% to 0.9185,NZD/USD gaining 0.43% to trade at 0.7774 and USD/CAD dipping 0.06% to 1.0511.

The Australian dollar found some support after data showed that China’s official manufacturing PMI came in at 50.1 in June, above expectations for 50.0, following a reading of 50.8 in May.

However, a separate report showed that China’s HSBC manufacturing PMI fell to a nine-month low of 48.2 in June, down from a preliminary reading of 48.3 and further below the 50 level that separates contraction from expansion.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, slipped 0.16% to 83.29. 

The Institute of Supply Management was to produce a report on U.S. manufacturing activity later in the trading day.