FOREX-Dollar on defensive as markets pin hopes on global economic recovery

* Dollar at lowest in over 2 months against a basket of
currencies
* U.S. manufacturing data shows modest rebound
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, June 2 (Reuters) - The dollar was on the defensive on
Tuesday as investors stuck to hopes of a global economic
recovery despite heightened concerns over U.S.-China tensions
and mass protests in many U.S. cities over the death of a black
man in police custody.
The U.S. dollar's index against a basket of six major
currencies =USD stood at its weakest level since mid-March, at
97.790.
The euro fetched $1.11295 EUR= , little changed so far on
Tuesday but holding near a 2-1/2-month high of $1.1154 touched
on Monday.
Sterling traded at $1.2491 GBP=D4 , having hit a one-month
high of $1.2506.
U.S. manufacturing activity eased off an 11-year low in May
and although the reading was weaker than forecast, it fit into
markets' expectations that the worst of the economic downturn
was behind as businesses reopen. "There are some potential flash points such as U.S.
demonstrations and China-U.S. tensions. But, on the whole, the
market is still moderately risk-on," said Kyosuke Suzuki,
director of forex at Societe Generale.
Against the safe-haven yen, the dollar was at 107.57 yen
JPY= , stuck in a well-worn range between 106 and 108 over the
last several weeks.
President Donald Trump said on Monday he was deploying
thousands of heavily armed soldiers and law enforcement to halt
violence in the U.S. capital and vowed to do the same in other
cities if mayors and governors fail to regain control of the
streets. The protests erupted over the death of George Floyd, a
46-year-old African-American who died in Minneapolis police
custody after being pinned beneath a white officer's knee for
nearly nine minutes.
Market risk sentiment was hurt only slightly on Monday when
Bloomberg reported that China had told state-owned firms to halt
purchases of soybeans and pork from the United States, raising
concerns that the trade deal between the world's two biggest
economies could be in jeopardy. The Australian dollar, often seen as a proxy bet on the
strength of the Chinese economy, fetched $0.6794 AUD=D4 ,
having reached its highest levels since late January.
The Reserve Bank of Australia is expected to keep rates on
hold when it meets later on Tuesday.
The Chinese yuan stood flat at 7.1230 per dollar CNH=EBS
in offshore trade, near its highest levels in almost two weeks.