* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Oct 1 (Reuters) - The dollar held at a 29-month high
on Tuesday as renewed evidence of strength in the U.S. economy
encouraged investors to buy the greenback.
With rate cuts in Australia, final PMI readings in Europe at
seven-year lows and weak confidence readings in Japan, hedge
funds pushed the dollar higher after it scored its biggest
quarterly gain since June 2018.
On Tuesday, a September survey showed euro zone
manufacturing activity had contracted the most in almost seven
years. Germany's September CPI data rose less than expected,
suggesting euro zone inflation was losing momentum and the
region's economy was not improving, despite a large dose of
stimulus from the European Central Bank last month.
"The economic divergence trade between Europe and the U.S.
has become even stronger, and unless there is a clear sign of a
slowdown in the U.S. economy, the dollar is expected to stay on
a strong footing," said Commerzbank analyst Thu Lan Nguyen.
Against a basket of other currencies .DXY , the dollar rose
0.2% to 99.58, its highest since May 2017. The next target for
the dollar is the January 2017 high of 103.82.
Economic surprise indexes published by Citigroup for the
United States and Europe .CESIUSD .CESIEUR showed an
increased divergence. The former is at its highest in nearly two
years; the latter has fallen to a 2019 low.
The weakness in economic indicators wasn't confined to
Europe. Japanese big manufacturers' business confidence worsened
to a six-year low in the July-September quarter, the Bank of
Japan's closely watched tankan survey showed. Further evidence of the strength of the U.S. economy will
come from September manufacturing PMI and ISM and September auto
sales data due later on Tuesday.
Elsewhere, the Australian dollar was the main underperformer
in the G10 after the Reserve Bank of Australia cut interest
rates and expressed concern about job growth The Australian dollar AUD=D3 fell 0.7% to $0.6700 after
the RBA cut its cash rate to a record low of 0.75%, as expected.
The New Zealand dollar fell to a four-year low of $0.6238
NZD=D3 , as weakening business confidence bolstered
expectations for monetary easing.
CESI and euro positions https://tmsnrt.rs/2nMxsQe
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