U.S. Markets

Dollar scores best day in four months after lousy quarter

NEW YORK (Reuters) - The dollar recorded its best day in four months on Monday, starting the new quarter on a strong note, bolstered by higher U.S. bond yields and data that showed manufacturing activity climbed to its strongest level in nearly three years.

Dollar banknotes are seen in this picture illustration taken June 13, 2017. REUTERS/Dado Ruvic/Illustration

The greenback just came off its worst quarter since 2010 last week as overseas central banks have signaled they are considering whether to begin reducing monetary stimulus in light of evidence their local economies are doing better.

“The market is debating whether central banks could follow through with their tightening. So far the data are going central banks’ way,” said Steven Englander, head of research and strategy at Rafiki Capital Management in New York.

Earlier Monday, the Institute for Supply Management said its index of national factory activity rose to 57.8 last month, the highest reading since August 2014.

This upbeat factory report propelled benchmark 10-year Treasury yield US10YT=RR to 2.353 percent, the highest in nearly seven weeks, Reuters data showed.

A closely watched index that tracks the dollar against six major currencies .DXY was 0.62 percent at 96.223, marking its biggest one-day increase since March 1.

The dollar index rebounded from a near nine-month low seen on Friday. It shed 4.71 percent in the second quarter, its steepest quarterly loss since the 8.49 percent drop in third quarter of 2010.

Speculators have reduced to net bullish dollar bets to their fewest in about year last week, Commodity Futures Trading Commission data showed late Friday.

The greenback climbed to a six-week high against the yen at 113.45 yen. It was last up 0.9 percent at 113.40 yen JPY=.

The euro EUR= retreated from its highest in more than a year against the dollar set last week. It was last down nearly 0.6 percent at $1.1358.

The single currency brushed off a Reuters report that said some European Central Bank policy-makers were wary of removing the easing bias in its policy statement at its July 20 meeting.

Currency trading activity was muted ahead of the U.S. July Fourth holiday. U.S. financial markets will close early on Monday and will be shut on Tuesday.

Ahead of Tuesday's meeting of Sweden's Riksbank, the Swedish crown was down 0.8 percent at 8.4920 crown per dollar SEK=.

Any shift in the wording of the Reserve Bank of Australia's statement, also early on Tuesday, may also support the Aussie AUD=D4, which was 0.5 percent below Friday's close at $0.7653.

Reporting by Richard Leong; additional reporting by Patrick Graham; in London; Editing by Susan Thomas and Grant McCool