* Pound recovers after dropping below $1.20 on Brexit
jitters
* Dollar index hits highest level since May 2017
* U.S. factory sector contracts for first time since 2016 -
* U.S. Treasury yields fall toward recent mid-2016 low
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Updates market action, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, Sept 3 (Reuters) - The dollar climbed on Tuesday
to its strongest level in over two years against a basket of
currencies as traders favored the greenback on worries about
U.S.-China trade tensions and a chaotic British exit from the
European Union.
The dollar's initial gains abated in the wake of a private
report that showed the U.S. manufacturing sector recorded its
first monthly contraction since 2016 in August. Last month's steeper-than-expected decline in the factory
activity index from Institute for Supply Management also touched
off a rally in the U.S. bond market, sending benchmark 10-year
yields US10YT=RR to their lowest levels since July 2016.
"This is a safe-haven trade rather than a rate-differential
trade," said Steven Englander, global head of G10 FX research at
Standard Chartered (LON:STAN) in New York.
Bloomberg News reported that Chinese and U.S. officials are
struggling to agree on a schedule for a round of trade
negotiations that had been expected this month.
UK Prime Minister Boris Johnson lost his working majority in
parliament when one of his Conservative lawmakers defected to
the pro-European Union Liberal Democrats. At 11:44 a.m. (1544 GMT), an index that tracks the dollar
versus six major currencies .DXY was up 0.11% at 99.022. It
hit 99.37 earlier Tuesday, which was its highest since May 2017.
The euro stabilized after tumbling to a 28-month low against
the dollar earlier Tuesday as investors priced in deeper
negative interest rates for longer in the euro zone.
Money markets have increased to more than 80% the
probability that the European Central Bank will cut its
benchmark rate by 20 basis points when it meets next week.
The ECB benchmark rate now stands at minus 0.40% and it has
all but promised a monetary policy stimulus package as economic
growth falters. Monday's PMI survey showed European
manufacturing contracted for seven straight
months. The euro EUR=EBS was little changed on the day at
$1.09645. It fell to $1.0926 earlier, its lowest since mid-May
2017. A break below the key $1.1000 level last week had sparked
heavier sell-offs.
The dollar weakened against the yen and the Swiss franc in
the aftermath of disappointing ISM manufacturing data.
The greenback fell 0.37% to 105.87 yen and decreased 0.31%
to 0.98735 franc.
Sterling was last up 0.2% at $1.2087 GBP=D3 after falling
to $1.1959, the lowest since October 2016, when it plunged to
$1.1491 in a flash crash. Against the euro, sterling rose to
90.7 pence, rebounding from a two-week low of 91.47 pence
EURGBP=D3 .
========================================================
Currency bid prices at 11:43AM (1543 GMT)
Description RIC Last U.S. Pct Change YTD Pct High Bid Low Bid
Close Change
Previous
Session
Euro/Dollar EUR= $1.0964 $1.0966 -0.02% -4.40% +1.0978 +1.0927
Dollar/Yen JPY= 105.8700 106.2100 -0.32% -3.99% +106.3800 +105.7500
Euro/Yen EURJPY= 116.07 116.49 -0.36% -8.04% +116.5600 +115.8800
Dollar/Swiss CHF= 0.9874 0.9905 -0.31% +0.61% +0.9928 +0.9865
Sterling/Dolla GBP= 1.2090 1.2066 +0.20% -5.23% +1.2102 +1.1959
Dollar/Canadia CAD= 1.3331 1.3325 +0.05% -2.24% +1.3382 +1.3323
Australian/Dol AUD= 0.6756 0.6713 +0.64% -4.16% +0.6758 +0.6688
Euro/Swiss EURCHF= 1.0828 1.0866 -0.35% -3.79% +1.0869 +1.0821
Euro/Sterling EURGBP= 0.9067 0.9091 -0.26% +0.91% +0.9148 +0.9052
NZ NZD= 0.6323 0.6306 +0.27% -5.87% +0.6326 +0.6270
Dollar/Dollar
Dollar/Norway NOK= 9.1054 9.1003 +0.06% +5.38% +9.1632 +9.0986
Euro/Norway EURNOK= 9.9833 9.9832 +0.00% +0.78% +10.0213 +9.9790
Dollar/Sweden SEK= 9.8420 9.8274 +0.13% +9.80% +9.8934 +9.8239
Euro/Sweden EURSEK= 10.7937 10.7799 +0.13% +5.16% +10.8225 +10.7709
GRAPHIC: Euro lowest since May 2017 https://tmsnrt.rs/2zMVY6w
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