The dollar dipped on Monday after data showed production at U.S. factories fell by the most in seven months in September, erasing earlier gains on expectations that the Federal Reserve may be closer to raising interest rates than previously expected.

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U.S. manufacturing output was hurt as an ongoing global shortage of semiconductors depressed motor vehicle output, providing further evidence that supply constraints were hampering economic growth.

Supply disruptions are adding to concerns about high inflation and adding to expectations that the U.S. central bank will need to act to stamp out price increases.

"Prospects for global central banks to be more aggressive to counter growing inflation fears may put the USD under some pressure, though the Fed in turn may act sooner than previously expected, supportive of the dollar," said Ronald Simpson, managing director, global currency analysis, at Action Economics.

The dollar fell 0.02% to 93.95 against a basket of currencies. It had earlier reached 94.17 as U.S. Treasury yields increased.

The New Zealand dollar gained after data showed that the country faced its highest price pressures in a decade.

It was last at $0.7081, after earlier rising to a one-month high of $0.7105.

Sterling briefly hit a 20-month high against the euro after Bank of England Governor Andrew Bailey sent a fresh signal that the central bank was gearing up to raise interest rates as inflation risks mount.

The euro was last up 0.24% against the British pound at 0.8455, after earlier falling as low as 0.8427.

The euro rose 0.11% to $1.1610, after earlier dropping to $1.1570. It has fallen 5% this year.

Analysts at Bank of America noted on Monday that commodity-linked currencies, including the Norwegian krone and the Canadian and Australian dollars, had been the best performers since the summer as energy prices rise, while the euro and the yen had been the worst.

The yen was close to a new three-year low, with the dollar last up 0.01% at 114.27 yen, close to Friday's 114.46 level that was last hit in October 2018.

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Currency bid prices at 3:14PM (1914 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.9540 93.9750 -0.02% 4.415% +94.1740 +93.8660

Euro/Dollar $1.1610 $1.1599 +0.11% -4.97% +$1.1622 +$1.1572

Dollar/Yen 114.2700 114.2000 +0.01% +10.57% +114.4450 +114.0300

Euro/Yen 132.66 132.52 +0.11% +4.52% +132.7800 +132.1600

Dollar/Swiss 0.9232 0.9231 +0.02% +4.36% +0.9273 +0.9224

Sterling/Dollar $1.3727 $1.3745 -0.12% +0.48% +$1.3764 +$1.3710

Dollar/Canadian 1.2379 1.2359 +0.15% -2.80% +1.2409 +1.2350

Aussie/Dollar $0.7414 $0.7419 -0.03% -3.59% +$0.7436 +$0.7379

Euro/Swiss 1.0717 1.0706 +0.10% -0.83% +1.0735 +1.0704

Euro/Sterling 0.8455 0.8435 +0.24% -5.39% +0.8463 +0.8425

NZ $0.7081 $0.7072 +0.12% -1.40% +$0.7105 +$0.7040

Dollar/Dollar

Dollar/Norway 8.4270 8.4235 +0.00% -1.90% +8.4830 +8.4145

Euro/Norway 9.7846 9.7768 +0.08% -6.52% +9.8192 +9.7433

Dollar/Sweden 8.6654 8.6030 +0.73% +5.72% +8.6710 +8.6073

Euro/Sweden 10.0610 9.9878 +0.73% -0.14% +10.0666 +9.9845