KONTAN.CO.ID - TOKYO. The dollar bounced off two-year lows on Wednesday as U.S. data pointed to a firm manufacturing activity, while the euro retreated from its highest levels since 2018 on profit-taking.

Economic data published on Tuesday showed U.S. manufacturing activity accelerated to a nearly two-year high in August amid a surge in new orders, with the reading from the Institute for Supply Management highest level since November 2018.

The U.S. data followed similarly upbeat Chinese and European manufacturing indicators.

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Mitsuo Imaizumi, chief FX strategist at Daiwa Securities, said an increase in pent-up demand, such as for cars, has contributed to the rise in the greenback.

Imaizumi however added that it is "unnecessary to see the data as entirely great," as the ISM’s data also showed the labour market remained in contraction territory.

The dollar index inched up 0.12% at 92.346, having hit its lowest since April 2018.

The greenback has been declining since last week, down about 1%, after the Federal Reserve announced it would focus more on average inflation and higher employment. With the Fed's shift in policy having leeway to keep U.S. interest rates lower for longer, it has encouraged traders to sell the currency.

Editor: Anna Suci Perwitasari