* Euro lifted away from 28-month lows, Lagarde comments help
* Dollar weakness helps emerging market currencies
* Sterling bounces on bid to stop no-deal Brexit
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds new quote, details, latest prices)
By Tommy Wilkes
LONDON, Sept 4 (Reuters) - The euro rebounded on Wednesday
as comments from European policymakers introduced some doubt
over the scale of a European Central Bank stimulus package
expected next week, while investors sold the dollar for riskier
currencies.
Christine Lagarde, the ECB's likely next president, said
highly accommodative monetary policy for a prolonged period was
necessary but she added that the bank needed to be mindful of
the negative side-effects of such tools. Expectations for an interest cut, the relaunch of asset
purchases and other ECB measures to stimulate the economy have
weighed on the euro - on Tuesday it hit a 28-month low of
$1.0926 EUR=EBS .
"The biggest risk facing the euro is the ECB not living up
to expectations," said Neil Mellor, currency strategist at BNY
Mellon. "The comments from Lagarde contributed to the euro's
pull back up."
The single currency gained as much as 0.5% to $1.1024.
Dollar broad-based weakness was also a factor. The greenback
began its descent after data on Tuesday showed that
manufacturing activity had contracted for the first time in
three years last month. That knocked the dollar back from more than two-year highs
and encouraged investors to bet on more Federal Reserve interest
rate cuts before the end of 2019.
The dollar was last down 0.4% against a basket of major
currencies, its index at 98.630 .DXY .
"Yesterday's manufacturing survey was very gloomy and
confirms that the U.S. is suffering from the global trade and
manufacturing downturn, along with everyone else," said Kit
Juckes, currency strategist at Societe Generale (PA:SOGN).
Other safe haven currencies, such as the yen and Swiss
franc, also fell as some calm returned to markets, helped by
reports that Hong Kong leader Carrie Lam would on Wednesday
announce the formal withdrawal of an extradition bill that
triggered months of unrest. Data showing growth in China's service sector also boosted
investor sentiment.
The yen was down 0.2% at 106.19 yen per dollar JPY=EBS .
The Swiss franc dropped 0.2% versus the euro to 1.0850 francs
EURCHF=EBS .
YUAN AND POUND REBOUND
The dollar's weakness helped China's offshore yuan CNH=EBS
pull away further from record lows plumbed earlier this week.
The yuan was last up 0.4% at 7.1525 yuan per dollar.
Emerging market currencies were mostly up on the dollar
weakness, while the Australian and New Zealand dollars also
seized on the greenback's weakness to rise AUD=D3 NZD=D3 .
The British pound recovered Tuesday's losses - when it hit a
three-year low - after the latest parliamentary attempt to stop
a no-deal Brexit took a step forwards.
Sterling bounced 0.9% to $1.2195 GBP=D3 , and against the
euro it rallied 0.5% to 90.365 pence EURGBP=D3 .
Lawmakers who defeated Prime Minister Boris Johnson's
government late on Tuesday are expected to introduce a bill in
parliament seeking to stop Britain from leaving the European
Union on Oct. 31 without transitional arrangements. (Editing by Alexander Smith and Andrew Cawthorne)