* 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; adds quote, graphic)
By Richard Leong
NEW YORK, Sept 3 (Reuters) - The dollar was little changed
on Tuesday against a basket of currencies, underpinned by
safe-haven demand on worries about U.S.-China trade tensions and
a chaotic British exit from the European Union.
Initial strength that propelled the dollar to a more than
two-year peak faded following a private report that showed the
U.S. manufacturing sector in August recorded its first monthly
contraction since 2016. "That's a reflection on what has been going on on the trade
front," said Don Ellenberger, head of multi-sector strategies at
Federated Investors in Pittsburgh.
The steeper-than-expected decline in the factory activity
index of the Institute for Supply Management touched off a rally
in the U.S. bond market, sending benchmark 10-year yields
US10YT=RR to their lowest levels since July 2016. News reported that Chinese and U.S. officials were
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. In late U.S. trading, the dollar index .DXY , which tracks
the greenback against versus six major currencies, was up 0.05%
at 98.964. Earlier, it hit 99.37, its highest level 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 the ECB
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 at $1.0966, after
hitting $1.0926 earlier, its lowest level 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 JPY=EBS and the Swiss
franc CHF=EBS in the aftermath of the disappointing ISM
manufacturing data. The greenback fell 0.2% to 106.045 yen and
decreased 0.3% to 0.98745 franc.
Sterling was last up 0.22% at $1.209 GBP=D3 after falling
to $1.1959, the lowest level 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 2:54PM (1854 GMT)
Description RIC Last U.S. Pct Change YTD Pct High Bid Low Bid
Close Change
Previous
Session
Euro/Dollar EUR= $1.0966 $1.0966 +0.00% -4.39% +1.0978 +1.0927
Dollar/Yen JPY= 106.0300 106.2100 -0.17% -3.84% +106.3800 +105.7500
Euro/Yen EURJPY= 116.26 116.49 -0.20% -7.89% +116.5600 +115.8800
Dollar/Swiss CHF= 0.9873 0.9905 -0.32% +0.60% +0.9928 +0.9864
Sterling/Dolla GBP= 1.2090 1.2066 +0.20% -5.23% +1.2105 +1.1959
Dollar/Canadia CAD= 1.3319 1.3325 -0.05% -2.33% +1.3382 +1.3323
Australian/Dol AUD= 0.6757 0.6713 +0.66% -4.14% +0.6763 +0.6688
Euro/Swiss EURCHF= 1.0828 1.0866 -0.35% -3.79% +1.0869 +1.0821
Euro/Sterling EURGBP= 0.9070 0.9091 -0.23% +0.96% +0.9148 +0.9052
NZ NZD= 0.6325 0.6306 +0.30% -5.84% +0.6328 +0.6270
Dollar/Dollar
Dollar/Norway NOK= 9.1055 9.1003 +0.06% +5.40% +9.1632 +9.0986
Euro/Norway EURNOK= 9.9850 9.9832 +0.02% +0.80% +10.0213 +9.9790
Dollar/Sweden SEK= 9.8281 9.8274 -0.03% +9.64% +9.8934 +9.8206
Euro/Sweden EURSEK= 10.7771 10.7799 -0.03% +5.00% +10.8225 +10.7709
GRAPHIC-ISM U.S. factory index vs dollar index https://tmsnrt.rs/2zK0ZwJ
GRAPHIC-Euro lowest since May 2017 https://tmsnrt.rs/2zMVY6w
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