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Dollar bounces back after euro flirts with threshold

The dollar bounced back in late trading Friday after encouraging US economic data lifted expectations that US interest rates will rise in June from their current 46-year lows of 1 percent.

The single European currency slipped to US$1.2208 against US$1.2265 late Thursday in New York.

The euro flirted with the US$1.23 threshold earlier Friday before easing back.

The dollar climbed to ¥111.27 against ¥110.92 on Thursday.

In particular, analysts noted that US manufacturing activity in and around Chicago was at its strongest in almost 16 years this month.

The Chicago Purchasing Managers Index stood at 68.0 percent, shattering forecasts for a slight decline to 61.9 percent after an unrevised 63.9 percent in April.

"This data suggest the overall economic expansion (both service sector and manufacturing sector) is continuing apace -- despite the recently reported dip in durable goods orders," said Drew Matus, an analyst at Lehman Brothers.

As a result, the dollar pushed higher after falling to its lowest level for more than a month in terms of its trade-weighted index.

"The dollar has recovered its poise," said Neil Mackinnon, chief economist at ECU Group.

The dollar has suffered over recent days as market participants grew wary of holding onto dollars over the long holiday weekend in the US and Europe.

Elsewhere, the pound remained near six-week highs against the dollar as a raft of British economic data Thursday lifted expectations the Bank of England will raise borrowing costs again in June, the first back-to-back hike since early 2000.

While the Nationwide, Britain's largest building society, found house prices had been unaffected in any meaningful manner by the central bank's three interest rate increases since November, the Confederation of British Industry reported that manufacturing orders were at their highest level in six years.

The euro was changing hands at US$1.2208 from US$1.2265 late Thursday in New York, ¥134.56 (¥136.08), £0.6664 (£0.6673) and 1.5459 Swiss francs (Sf1.5270).

The dollar stood at ¥111.27 (¥110.92) and 1.2542 Swiss francs (Sf1.2447).

The pound was at US$1.8318 (US$1.8374), ¥202.09 (¥203.80) and 2.2974 Swiss francs (2.2875).

On the London Bullion Market, the price of an ounce of gold stood at 393.25 dollars, from 393.60 dollars late Thursday.
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