Dollar dips after manufacturing data claims rise in backlogs

The dollar softened on Tuesday, moving closely towards five-month lows after data depicted that even when U.S. manufacturing activity boosted in the month of May, unfinished work increased due to scarcity of raw materials and labor, reported Reuters.

The Institute for Supply Management (ISM) stated that its index of national factory activity surged more than expected in May from April, but that scarcity of raw materials, like semiconductors, and shortage of workers, impacted the manufacturing.

The dollar index was low by 0.124% at 89.68, having soared as high as 90.447 on Friday, when a measure of U.S. inflation closely observed by the Fed declared its biggest annual rise after 1992.

Kathy Lien, Managing Director at BK Asset Management said, “The soft employment segment of the ISM report, as well as a weaker-than-expected prices paid component, point to supply issues in the manufacturing sector having an impact on the economy as a whole.”

“This … reinforces the Federal Reserve’s conservative stance and reluctance to join some of the other central banks in talking about earlier tightening,” Lien added.