(Updates with late New York prices)
* Currency speculators increase short bets on euro -CFTC
* U.S. dollar index at 3-1/2-month high
By Daniel Bases
NEW YORK, June 2 The U.S. dollar rose on Monday,
aided by subdued German inflation figures and
slower-than-expected manufacturing growth in the euro zone, both
of which piled pressure on the European Central Bank to ease
monetary policy aggressively this week.
The U.S. dollar index rose 0.40 percent against a basket of
currencies from its main trading partners, hitting a
Attention remains squarely on the ECB's policy meeting on
Thursday and the U.S. payrolls report for May on Friday.
"The euro has been trading on the softer side in general as
we go into the ECB meeting as there is some level of caution
here," said Alan Ruskin, global head of G10 currency strategy at
Deutsche Bank in New York.
Currency speculators increased short euro positions to
16,633 contracts from 9,220 last week, according to data for the
week ended May 27 released by the Commodity Futures Trading
Commission on Friday.
The ECB is preparing policy options for its meeting this
week that include cuts in all its interest rates, Reuters
reported last month.
The euro was at $1.3596, down 0.26 percent in New
York trade, close to Thursday's 3-1/2-month low.
Germany's annual inflation rate rose 0.6 percent, less than
the 1.0 percent expected in a Reuters poll and the lowest
reading since February 2010. Euro zone inflation data is due out
"Soft inflation now reinforces the point of view that the
ECB will remain dovish and remain ready to ease policy in the
future. That's negative for the euro," said Vassili Serebriakov,
currency strategist at BNP Paribas in New York.
The euro also fell against sterling, down 0.23
percent to 81.18 pence, with diverging monetary policy outlooks
for the ECB and the Bank of England underpinning the pound.
In the United States, the Institute for Supply Management's
data showed manufacturing activity expanded in May with a
reading of 55.4 versus 54.9 in April, just below the Reuters
estimate of 55.5. A reading above 50 indicates expansion.
ISM's initial release incorrectly showed activity slowing.
The original report, for which ISM blamed a computer glitch,
immediately became suspect because it was so far from forecasts.
The original report pushed U.S. Treasury yields down because
it supported loose U.S. monetary policy. The dollar followed
suit, but only temporarily, as questions in the market fueled
doubt over the report's accuracy. Treasury yields have since
Earlier, the final reading of the manufacturing Purchasing
Managers' Index for the euro zone disappointed, slipping to a
The dollar hit a one-month high against the yen, at 102.48
yen, up 0.66 percent, and pierced the 100-day moving
average of 102.37. The euro rose 0.40 percent to 139.28 yen
(Additional reporting by Anirban Nag in London and; Lisa
Twaronite in Tokyo; Editing by James Dalgleish, Peter Galloway,
Nick Zieminski and Leslie Adler)