* The pound drops below $1.20 on Brexit clash
* Offshore Chinese yuan hits record low on trade worries
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, Sept 3 (Reuters) - The euro touched a 28-month low
against the dollar on Tuesday as investors priced in deeper
negative interest rates for longer in the euro zone.
Money markets has ratcheted up to 83% the probability that
the European Central Bank will cut its benchmark rate by 20
basis points when it meets next week. It now stands at minus
0.40%.
The ECB has also all but promised a monetary policy stimulus
package, including new quantitative easing, as economic growth
falters and Germany's manufacturing drops into recession.
A survey on Monday showed European manufacturing contracted
for seven straight months, reinforcing expectations the ECB will
ease its policy. The euro EUR=EBS was last down by 0.3% at $1.0937. It fell
to $1.09305 in Asian trade, its lowest since mid-May 2017, after
breaking below the key $1.1000 level last week.
The euro could get some relief if the Five Star Movement and
the Democratic Party form a coalition government in Italy,
analysts said. Five-Star members will vote on Tuesday on forming
a coalition with PD.
"If the vote succeeds, the euro could gain somewhat," MUFG
analysts said in a note, adding that "Italian assets like bonds
and stocks would likely rally somewhat further."
The pound fell to its lowest in nearly three years on
Tuesday as British lawmakers prepared to vote on the first stage
of their plan to block Prime Minister Boris Johnson from
pursuing a no-deal Brexit. GBP/ and Sterling was down 0.7% at $1.1963 GBP=D3 after falling to
$1.1959, the lowest it has been since October 2016, when it
plunged to $1.1491 in a flash crash.
Against the euro, sterling touched a two-week low of 91.47
pence EURGBP=D3 .
"The pound is being sold all over the place, because the
political risk has forced us to recognise that a no-deal Brexit
is possible," said Junichi Ishikawa, senior foreign exchange
strategist at IG Securities in Tokyo. "At this point, I see no
reason to stay long in sterling."
Elsewhere, the Chinese yuan CNH=EBS was 0.1% stronger at
7.1865 yuan against the dollar. It reached a record low of
7.1975 in early offshore trade after Bloomberg News reported
that Chinese and U.S. officials were struggling to agree a
schedule for trade talks that had been expected this month.
Euro lowest since May 2017 https://tmsnrt.rs/2zMVY6w
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