Dollar surges as service sector growth hits 4-month high

The dollar bounced off the lows Tuesday, despite the release of mostly downbeat economic data, fuelling concerns that slowing economic growth would deter the Federal Reserve from adopting an aggressive rate hike policy.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.30% to 97.17 by 13:12 EDT.

Investors mulled over the release of a raft of economic data, as better than expected services business activity offset manufacturing and housing data that fell short of expectations.

IHS Markit flash U.S. manufacturing purchasing managers index (PMI) fell to its lowest level in eight months with a reading of 52.5, while its services (PMI) soared to a four-month high with a reading of 54, which was above economists’ forecasts.

A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

In a separate report on Tuesday, the Commerce Depart said sales of newly constructed homes fell in April to a seasonally adjusted annual rate of 569,000. That was below analysts’ estimates of a drop to 610,000.

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