The dollar rose against the yen and euro on Tuesday, boosted by an upbeat US manufacturing sector survey, while the pound wallowed near a three-decade low on concerns over a potential "hard Brexit" for Britain. The dollar added to overnight gains and was up 0.5 percent at 102.170 yen after touching a 13-day high of 102.395. The euro dipped 0.1 percent to $1.1201 after slipping 0.3 percent the previous day.
The greenback was on the front foot after an Institute for Supply Management (ISM) survey showed the US manufacturing sector returned to expansion in September. The dollar also firmed against the yen because of a reduction in risk aversion, as concerns over Deutsche Bank have eased for now.
"There might be follow-through buying for the dollar, but it could be difficult for the currency to break out of recent range as the ISM data alone won't boost the case for the Fed to continuously hike rates," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo. Fed funds futures imply that investors still see a very low chance of the Federal Reserve raising interest rates at its next policy meeting in November. The dollar index rose 0.2 percent to 95.893.
The US currency was particularly strong against the pound, which has declined steadily since British Prime Minister Theresa May set a March deadline to begin the UK's formal departure process from the European Union. Sterling was down 0.1 percent at $1.2829 after falling on Monday to $1.2818, nearing the 31-year low of $1.2798 plumbed on July 6 in the market turmoil following the late-June Brexit referendum.
The Australian dollar showed little reaction to the Reserve Bank of Australia's widely-expected policy decision to stand pat on monetary policy. The RBA kept its cash rate at a record low of 1.5 percent as Australia's biggest-ever boom in apartment-building has helped support economic activity. The Aussie was effectively flat at $0.7671, little changed from levels seen prior to the RBA rates announcement.
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