* Dollar slips, near five-month lows
* Yuan steadies after PBOC raises reserve requirement
* Euro zone inflation data in focus
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
LONDON, (Reuters) - The dollar hovered near five-month lows
on Tuesday as investors waited for euro zone inflation data and
a U.S. manufacturing survey, while the yuan steadied after
China's central bank took steps to limit its appreciation.
The dollar index was back below 90 in early European trading
, having hit as high as 90.447 on Friday, when a measure
of U.S. inflation closely watched by the Fed posted its biggest
annual rise since 1992. The gauge sank 0.3% on Monday in a
market thinned by U.S. and British holidays.
Fed officials, led by Chair Jerome Powell, have said
repeatedly they expect price pressures to be transitory and
monetary stimulus to stay in place for some time, but investors
are wary that a strong pandemic recovery could force the Fed's
Australia's central bank left its cash rate at record lows
and reiterated its lower-for-longer policy stance, even as data
showed the country's output was above its pre-pandemic level.
But the Australian dollar was still up around 0.5% versus
the U.S. dollar at 0739 GMT, at 0.77625.
The New Zealand dollar was up 0.1% at 0.72845. The
Reserve Bank of New Zealand surprised markets last week by
hinting at a future interest rate hike.
China's yuan was steady after authorities ordered banks to
increase their foreign exchange holdings, a move seen as an
attempt to limit the fast yuan appreciation.
The offshore yuan was at 6.3726, flat on the day, having
crossed the key psychological 6.40 level last week and touched a
new three-year high of 6.3524 on Monday.
Analysts said that although the central bank's move - which
is expected to withdraw just $20 billion worth of liquidity from
the system - would slow the pace of the yuan's strengthening
versus the dollar, it was unlikely to stop it completely.
"Fundamental pressures that have encouraged a stronger
renminbi over the past year remain in place," wrote MUFG
currency analyst Lee Hardman in a note to clients.
"The measures will not prevent global investors from easily
obtaining cheap foreign exchange overseas and being able to
continue investing in higher yielding renminbi bonds."
"The loose policy approach of other major central banks
including the Fed is expected to keep upward pressure on the
renminbi," he added.
Britain's pound hit a three-year high of $1.425 during the
Asian session, helped by remarks from a Bank of England
policymaker last week pointing to a rate hike next year or
At 0740 GMT, it was up 0.1% on the day at $1.42315.
The Canadian dollar was close to a six-year high, up 0.3%,
having strengthened for four months in a row as the outlook for
the domestic economy improved.
As currency traders weigh up the prospects for central bank
tightening, focus in the near-term is on euro zone HICP
inflation data for May, due at 0900 GMT.
The U.S. ISM manufacturing survey due at 1400 GMT will also
be closely watched.
The U.S. jobs report for May is due on Friday.
"We dont expect data this week to materially change market
expectations about the Feds policy stance, and the dollars
momentum may stay soft on the back of a still negative real rate
narrative," wrote ING FX strategists in a note to clients.
(Reporting by Elizabeth Howcroft; additional reporting by Kevin
Buckland; Editing by Angus MacSwan