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FOREX-Dollar gains on pound and yen after upbeat U.S. services data

(Moves dateline to New York from London, adds details on U.S. economic data release, updates prices)

By John McCrank and Alun John

NEW YORK, Dec 5 (Reuters) - The dollar rose against the pound and the yen on Monday after data showed that U.S. services industry activity unexpectedly picked up in November, prompting speculation the Federal Reserve may not be able to pivot to slower rate rises imminently.

The Institute for Supply Management (ISM) said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October, indicating that the services sector, which accounts for more than two-thirds of U.S. economic activity, remained resilient in the face of rising interest rates. Economists polled by Reuters had forecast the non-manufacturing PMI would slip to 53.1.

The survey followed on the heels of data last Friday showing stronger-than-expected U.S. job and wage growth in November. Consumer spending also accelerated in October.

The string of upbeat reports have raised optimism that a recession could be avoided in 2023, with growth just slowing sharply, while also spurring speculation about how high rates will rise.

"The market is just conjecturing about how aggressive the Fed needs to be to vanquish inflation," said Joe Manimbo, senior market analyst at Convera.

Fed Chair Jerome Powell said last week the U.S. central bank could scale back the pace of its rate increases "as soon as December."

The dollar climbed 1.35% against the yen to 136.15, bouncing from Friday's three-and-a-half month low of 133.62, while sterling, which hit a more than five month top of $1.2345 in Asian trade Monday, was down 0.63% at $1.2215 at 10:45 EST (1345 GMT).

The euro dipped 0.02% to $1.0538, not far off the $1.0585 it hit in Asian hours, its highest since June 28.

The dollar slid 0.12% on the Swiss franc to 0.9346 , just above Friday's near eight-month low of 0.9326.

The dollar index, which tracks the greenback against six peers, fell 1.4% last week, and 5% in November, its worst month since 2010.

But now speculation is growing that 'pivot' narrative has run its course.

"I think this issue about 'peak inflation, peak rates, peak dollar' - I think - is slowly turning into a 'persistence of inflation, a persistence of higher-for-longer interest rates," said Jane Foley, senior FX strategist at Rabobank.

The dollar's aggregate positioning against G10 currencies is now neutral, and at the lowest levels since August 2021, according to ING calculations based on CFTC data.

ING also believes that dollar softening may have run its course for now, given the possibility of the Fed maintaining its hawkish narrative for longer, that relaxing China's COVID restrictions could prove complicated, and that oil and gas prices could rise again.

The other major factor for markets on Monday was China, where several cities have been easing their COVID restrictions. Official messaging about how dangerous the virus is also has changed following recent, unprecedented protests against the government's uncompromising "dynamic zero-COVID" strategy.

This boosted China's yuan, and the dollar fell below 7.0 yuan in offshore trade for the first time since mid September, and was last at 6.9588.

(Reporting by John McCrank in New York and Alun John in London; Editing by Simon Cameron-Moore, Crispian Balmer, Chizu Nomiyama and Susan Fenton)

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