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FOREX-Dollar rises on upbeat U.S. manufacturing data

* Dollar index down 0.4% for the week

* U.S. manufacturing activity powers ahead in early May (Updates to U.S. afternoon)

NEW YORK, May 21 (Reuters) - The dollar rose against a basket of currencies on Friday, boosted by encouraging U.S. manufacturing data, but remained on track for a weekly loss as traders’ concerns about taper talk in U.S. Federal Reserve minutes moderated.

The dollar has given back much of the advance it made after a mention in minutes from the Fed’s April monetary policy meeting of possible future discussions on paring back stimulus, raised hopes U.S. interest rate raises might come earlier than previously thought.

“Taper concerns have faded rather quickly, it would seem,” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

The U.S. currency found some support after data showed U.S. factory activity gathered speed in early May amid strong domestic demand.

The dollar index, measuring the greenback against a basket of six currencies, was 0.222% higher at 89.993. The index, which hit a four-month low earlier in the session, was on pace for a loss of 0.4% for the week.

Some strategists remain doubtful the Fed will rush to pull back from its accommodative stance.

“We continue to expect the USD to remain soft while U.S. yields remain contained,” Osborne said.

Still, continued improvement in U.S. data, especially relative to Europe, is likely to bolster the bull case for the greenback, other analysts said.

“The latest flash PMIs reinforce our view that the economy will continue to grow at a faster pace in the U.S. than in the euro-zone in the next few years,” said Simona Gambarini, markets economist at Capital Economics.

“This feeds into our forecast that long-dated yields will rise more rapidly in the former than in the latter and that the euro will fall back against the U.S. dollar,” Gambarini said

A loosening of COVID-19 restrictions helped surveys of German services activity and French business activity come in better than expected in May, although they had little effect on the euro on Friday.

The British pound fell 0.2% on Friday but was on track for its third consecutive week of gains against the dollar, helped by a series of data releases reinforcing market expectations for a strong economic recovery in the United Kingdom.

Meanwhile, bitcoin slid on Friday after China doubled down on its efforts to prevent speculative and financial risks by cracking down on the mining and trading of the world’s largest and most popular cryptocurrency.

Bitcoin traded down 11.5% to 35,952.05. Ether fell 14.3%.

Reporting by Ritvik Carvalho and Saqib Iqbal Ahmed Additional reporting by Tom Westbrook in Singapore Editing by Jonathan Oatis and Andrea Ricci

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