FOREX-Dollar retreats after Friday's surge as U.S. data disappoints – Yahoo Finance

* U.S. manufacturing sector slows in April amid supply challenges

* Ethereum hits record high (Updates prices, market activity, comments to U.S. market open; changes dateline, previous LONDON)

By Saqib Iqbal Ahmed and Ritvik Carvalho

NEW YORK, May 3 (Reuters) – The dollar fell against a basket of currencies on Monday, ceding some of the ground gained in the previous session, as Treasury yields retreated and lacklustre data weighed on the U.S. currency

U.S. manufacturing activity grew at a slower pace in April, likely constrained by shortages of inputs amid pent-up demand unleashed by rising vaccinations and massive fiscal stimulus.

The dollar index, measuring the greenback against a basket of six currencies, was 0.4% lower at 90.88, slipping back towards Thursday’s 2-month low despite a boost of 0.7% from month-end flows on Friday.

“The USD’s sharp rally last Friday has blunted the sell-off in the currency but we are not convinced at this point that a stronger, broader—corrective— rebound is on the cards,” Shaun Osborne, chief currency strategist at Scotiabank said in a note.

“It would take strong additional gains this week to tilt the risk towards a recovery in the USD and its early form is not promising,” Osborne said.

Bearish sentiment towards the dollar is on the rise after a brief pullback. U.S. dollar net short positioning rose this week to the highest level since late March, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.

The dollar fell against the euro on Monday after a survey showed euro zone factory activity growth surged to a record high in April, boosted by burgeoning demand and driving a rise in hiring, although supply constraints led to an unprecedented rise in unfulfilled orders.

Comments by Luis de Guindos, the European Central Bank’s vice president, also helped the euro. The ECB can start to phase out emergency stimulus measures when the pace of coronavirus vaccinations reaches a critical level and the economy picks up speed, he told an Italian newspaper.

Trading in foreign exchange markets was thinned by holidays in Japan, China and Britain, which kept a lid on volatility.

The Australian and New Zealand dollars were firmer on Monday, though not enough to completely recoup Friday’s losses.

FX traders will be looking to labor market data out later this week to read the health of the U.S. economic recovery and to gauge how the U.S. Federal Reserve’s may respond to improving data.

Federal Reserve Chair Jerome Powell is due to speak later on Monday and will be followed by a raft of Fed officials this week. Central bank policy meetings are also scheduled this week in Australia, Britain and Norway.

In crypto markets, ethereum broke past $3,000 to post a fresh record high of $3,203.18.

(Reporting by Saqib Iqbal Ahmed in New York and Ritvik Carvalho in London; additional reporting by Tom Westbrook in Singapore; Editing by Toby Chopra, Kirsten Donovan)

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