By Hannah Lang
NEW YORK (Reuters) -The dollar rose on Monday on news that the U.S. manufacturing sector grew in March for the first time since September 2022, while the yen lingered below 152 per dollar over the threat of intervention by the Bank of Japan.
The Institute for Supply Management (ISM) said U.S. manufacturing production rebounded and new orders increased, although factory employment remained subdued and prices for inputs rose.
The rebound ended 16 straight months of contraction in manufacturing, which accounts for 10.4% of the economy. That was the longest period of shrinking since August 2000 to January 2002.
The dollar index, which measures the U.S. currency against six rivals, was 0.507% higher at 105.01.
"The ISM information is really leading the way and it's just showing that ... inflation is not always falling down, and I think the market's reacting quite a bit to that," said Eugene Epstein, head of structuring for North America at Moneycorp.
Markets on Monday lowered their bets on the Federal Reserve cutting rates in June, after boosting the odds on Friday's news of easing U.S. prices, the CME FedWatch tool showed.
The personal consumption expenditures (PCE) price index rose 0.3% in February, the Commerce Department's Bureau of Economic Analysis said on Friday, compared with the estimated 0.4% rise by economists in a Reuters survey.
"In conjunction with Friday's PCE data, I don't think this is still going to materially actually change the calculation for the Federal Reserve, but markets are starting to once again move a little bit more in line with the Fed's own expectations as to how often and when they're going to cut this year," said Helen Given, FX trader at Monex USA.
Fed Chair Jerome Powell said on Friday the latest U.S. inflation data was "along the lines of what we would like to see," affirming his remarks after the Fed's policy meeting last month.
The currency market's spotlight has been on the yen as its move toward 1990 levels revives the risk Japanese authorities will intervene.
The yen touched a 34-year low against the dollar of 151.975 on Wednesday and was last at 151.635 per dollar on Monday.
The BOJ intervened in September and October of 2022 as the yen slid toward a 32-year low of 152 to the dollar.
Japan's plans for the yen remain difficult to predict. Since the fiscal year has ended, the BOJ need not worry about sudden yen movement affecting balance sheets.
But news of last week's emergency meeting of Japan's three monetary authorities - the Ministry of Finance (MOF), BOJ and Financial Services Agency - and comments from officials have so far kept the yen above 34-year lows.
Finance Minister Shunichi Suzuki said on Monday he would not rule out options against excessive currency movement and would respond appropriately, reiterating his warning on rapid yen moves.
China's yuan weakened on Monday, pressured by the dollar, even as the latest Chinese data implied the economy's recovery has gained traction and the central bank's sustained efforts have stabilised the currency. [CNY/]
The offshore yuan last traded at 7.2604 per dollar.
In other currencies, the euro was 0.48% lower at $1.0738, while sterling was last at $1.25440, down 0.63% on the day.
In cryptocurrencies, bitcoin last fell 1.07% to $68,906. Ether was 1.61% lower at $3,441.90.