March 24 (Reuters) - The dollar index climbed for the fourth day on Monday, hitting a two-week peak following a U.S. business survey that indicated increased activity in March. The S&P Global survey also revealed that the index of prices paid for inputs reached its highest point in nearly two years.
The overall PMI rose primarily due to a boost in services, partly attributed to warmer temperatures, while the manufacturing sector slipped back into contraction. Investor sentiment, which was already rising due to reports that the Trump administration might narrow the focus of levies in its upcoming round of tariffs, was further boosted by the S&P release.
The dollar was also bolstered by anticipated favorable portfolio rebalancing flows at the end of the month and hedge fund purchases of the greenback ahead of the April 2 tariff deadline. Atlanta Fed President Raphael Bostic said he expects slower inflation progress in the coming months, leading him to believe the Federal Reserve will only cut its key interest rate by 0.25% by year-end. U.S. President Donald Trump said said he would impose tariffs on countries buying Venezuela oil. EUR/USD was down for a fourth day though losses slowed near the 1.08 level. Dip buyers are partly encouraged by the report euro zone business growth expanded at its fastest pace in seven months. A possible bull flag may be forming though rebalancing flows look to support the dollar into quarter-end. By contrast, EUR/USD could unravel March gains on a drop below 1.0766, the March 6 low, with the 200-day moving average at 1.0732 offering nearby support. GBP/USD pared gains after the U.S. PMI report though focus is on Wednesday's U.K. fiscal update and inflation report. Monday's session high of 1.2974 was reached after a preliminary S&P reading of the UK services sector hit a seven-month high. USD/JPY was on track to close above 150 as Treasury 2-year yields rose above 4% following the U.S. data and Fed comments. Its climb slowed near the daily upper Bollinger and weekly cloud top though momentum was on the side of dollar bulls. USD/JPY could test 150.93, the February 7 low, and 151.30 March high on further gains.
Treasury yields were up 6 to 9 basis. The 2s-10s curve was down about 1 basis point to +29.3bp.
The S&P 500 rose 1.64% with consumer shares leading the advance. Oil rose 1.36%, gold slipped 0.53% and copper eased 0.76%.
Heading toward the close: EUR/USD -0.04%, USD/JPY +0.80%, GBP/USD +0.08%, AUD/USD +0.24%, =USD +0.22%, EUR/JPY +0.73%, GBP/JPY +0.86%, AUD/JPY +1.04%.(Editing by Burton Frierson Reporting by Robert Fullem)
