Investing.com - The dollar edged higher on Wednesday, a day after weak U.S. manufacturing data knocked the greenback off two-year highs, while the British pound fell back towards one-month lows amid fresh Brexit uncertainty.
Data on Tuesday showed that the U.S. manufacturing sector contracted in September to its weakest level in more than a decade as business conditions deteriorated further amid the trade war between the U.S. and China.
Analysts, however, said the setback for the dollar will likely prove temporary given its higher yield versus peers and the relative strength of the U.S. economy - non-farm payrolls data due on Friday should give some more insight into the health of the U.S. economy.
"Yes U.S. manufacturing is disappointing but it's no more disappointing than the euro zone PMIs (Purchasing Managers' Index surveys) we saw," said Michael Hewson, analyst at CMC Markets, referring to weak surveys in the euro area released this week.
Hewson said weakness in U.S. manufacturing would have to spill over into the services sector before it had a significant impact on monetary policy and the outlook for the dollar.
The U.S. dollar index was 0.1% higher at 98.95 by 4:11 AM ET (8:11GMT) after rising as high as 99.667 on Tuesday, a 29-month peak, before the manufacturing data was released.
The pound was down 0.2% to 1.2276, not far from an almost one-month low plumbed overnight.
Prime Minister Boris Johnson will unveil his final Brexit offer to the European Union later on Wednesday and make clear that Britain intends to leave the EU on Oct. 31, no matter what.
The euro dipped 0.1% to 1.0916, holding above the two-year low of 1.0879 touched on Tuesday.
The dollar was little changed against the safe haven yen, at 107.69.
Elsewhere, the Australian dollar was trading at 0.6695, hovering just above its decade-low of 0.6672 hit on Tuesday after the Reserve Bank of Australia cut rates to an all-time low.
--Reuters contributed to this report