* Aussie slips as HSBC’s China flash PMI hits 11-mth low
* Dollar index firmer, pulls up from 1-month low
* Market positioning may hold back the dollar - trader
By Masayuki Kitano
SINGAPORE, July 24 (Reuters) - The dollar edged higher versus a basket of currencies and the Australian dollar slipped on Wednesday, as fresh signs of a slowdown in China’s manufacturing sector dampened appetites for risk.
The Australian dollar had set a one-month high earlier in the session as key measures of underlying inflation in Australia were taken as reducing chances for an interest rate cut next month. Still, the data was mixed and views remained split on the likelihood of a rate trim.
The Aussie, however, declined after the flash HSBC/Markit Purchasing Managers’ Index for China came in at an 11-month low in July, while the U.S. dollar pushed broadly higher.
“Risk appetite is likely to be muted and the dollar should benefit as a result,” said Roy Teo, FX strategist for ABN AMRO Bank, referring to the weakness in the gauge of Chinese manufacturing activity.
The dollar index, which measures the greenback’s value against a basket of currencies, rose 0.3 percent to 82.203 , pulling away from a one-month low of 81.926 set on Tuesday.
The Australian dollar slipped 0.4 percent to $0.9254 , down from an intraday high of $0.9320, the Australian dollar’s strongest level since late June.
The Aussie dollar is sensitive to economic data out of China, which is Australia’s biggest export market.
The U.S. dollar took a breather from a recent bout of weakness. The euro fell 0.2 percent to $1.3193, down from a one-month high of $1.3239 that was touched on Tuesday.
The dollar rose 0.5 percent against the yen to 99.94 yen .
Still, some market players were cautious on the near-term outlook for the greenback, which has declined after Federal Reserve Chairman Ben Bernanke recently stressed the Fed will keep rates low for a long time to come, even if it started to scale back its asset purchases.
Recent price action in the euro versus the dollar, for example, suggests that some market players are still long the dollar and such positioning could temper any gains for the greenback, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
Data from the U.S. Commodity Futures Trading Commission shows that in the week ended July 16, currency speculators boosted their bets in favour of the U.S. dollar to the highest in six weeks.