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Dollar Up Over Positive U.S. Economic Data

The dollar was on an upward trend on Wednesday in Asia, after the U.S. saw better-than-expected manufacturing data the day before.

The U.S. Dollar Index that measures the greenback against a basket of six major currencies inched up 0.03% to 92.362 by 12:33 AM ET (5:33 AM GMT).

The Institute for Supply Management (ISM) released its manufacturing data on Tuesday. Its PMI, at 56, was better than the expected 54.5 and 54.2 in July. The rosy data came on the heels of China and Japan’s uptick in manufacturing, playing a part to restore confidence for economic recovery during the COVID-19 pandemic.

Although the rosy data gave the dollar a boost, the greenback still remains at a one-year low on inflation expectations. The dollar has been on downward trajectory from this year’s high at above 103 recorded in March.

But some investors remain cautious about the data. Daiwa Securities chief FX strategist Mitsuo Imaizumi told Reuters that the ISM data also showed the labour market remained in contraction territory, warning that it is “unnecessary to see the data as entirely great.”

The USD/CNY pair inched up 0.03% to 6.8294. The People's Bank of China (PBOC) set the reference rate of the yuan against the dollar at 6.8376 versus the previous day’s 6.8498.

Similarly, the USD/JPY pair inched up 0.09% higher at 106.05. The AUD/USD pair edged down 0.20% to 0.7357, with the country officially entering a recession, after its second quarter GDP contracted by a record 7% quarter-on-quarter. The GBP/USD pair inched down 0.01% to 1.3380.

That said, the New Zealand dollar remained strong, with the NZD/USD pair still gaining 0.36% to 0.6781.

There could be further rebound in the greenback as the U.S. is working to roll out more relief measures. Senate Republicans are reportedly to bring up a targeted COVID-19 relief bill next week, while U.S. Treasury Secretary Steven Mnuchin said the Trump administration is willing to work on a bipartisan relief package.

"Let's move forward on a bipartisan basis on points we can agree upon," Mnuchin urged at a hearing by the House Select Subcommittee on the Coronavirus Crisis. "The president and I want to move forward."

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