* Euro remains weak after eurozone inflation data
* Sterling stable
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds new context, chart and updates prices)
By Olga Cotaga
LONDON, Aug 30 (Reuters) - The Japanese yen rose on Friday
and is on track for its biggest monthly gain in three months as
a global rush to perceived safe-haven assets sapped investor
appetite on stock markets.
August was a particularly bad month for equities as
international trade tensions and fears over the global economy
encouraged investors into bonds and gold, perceived as safer
bets in times of economic and political strife.
The yen, which typically gains during periods of economic
and geopolitical uncertainty, edged 0.1% higher against the
dollar JPY=EBS to 106.39 yen. It is up more than 2% in August
for its biggest monthly gain since May.
The gains were fuelled by a global rally in government debt,
with yields in major developed markets pushing deeper into
negative territory. For a graphic, click "Trade war thus far caused lower rates, not recession," Bank
of America Merrill Lynch strategists, led by Michael Hartnett,
said in a report.
Washington is due on Sunday to start imposing 15% tariffs on
$125 billion of goods from China, affecting consumer items from
smart speakers to sneakers.
Investors fear the intensifying trade dispute could lead the
U.S. economy into recession - a scenario that looks more likely
after the U.S. bond yield curve inverted this week. Inverted
yield curves are widely considered highly reliable indicators of
recession.
"The talking point is still the U.S. yield curve inversion
and whether the U.S. economy heads into a recession ... In
short, the atmosphere is not so good," said State Street's Tokyo
branch manager Bart Wakabayashi.
FRAGILE EURO
The euro, meanwhile, plunged to a one-month low against the
dollar as investors looked for aggressive easing by the European
Central Bank and ignored doubts among some policymakers over the
need for more stimulus.
Poor euro zone economic data on Thursday reinforced views
that the ECB would cut its benchmark interest rate and announce
a new round of quantitative easing at its September meeting.
German inflation slowed in August and unemployment rose,
providing further evidence that Europe's largest economy is
slowing.
More broadly, year-on-year inflation in the entire euro area
was unchanged at 1% in August, but that failed to make an
impression on the common currency.
Christine Lagarde, the ECB's next president, said the
central bank still has room to cut rates if necessary, though
divisions clearly remain within the ECB. The euro was down 0.1% at $1.1043 EUR=EBS after falling to
$1.1033, its lowest since Aug. 1. It has shed nearly 12% against
the dollar since the start of last year.
Elsewhere, the pound stabilised despite growing probability
of Britain crashing out of the European Union on Oct. 31 without
a divorce deal.
British Prime Minister Boris Johnson, a Brexiteer, received
royal approval this week to suspend parliament for a month,
which analysts identify as a move to dodge a possible
no-confidence vote in his government and strenghten his
negotiating hand in Brussels. GBP/
Sterling's reaction, however, was fairly modest, remaining
quite a way off the 2-1/2-year low of $1.2015 reached this
month.
An index that tracks the dollar against a basket of six
other currencies was flat at 98.557, down from a one-month high
of 98.609 in Asian trading .DXY . The dollar was supported by
investors repositioning funds in their portfolios, analysts
said.
"The dollar is getting bid from month-end flows, but the
euro side of the equation is compromised by what appears to be a
set of lacklustre economic data in the eurozone," said Jeremy
Stretch, head of G10 forex strategy at CIBC Capital Markets.
"This opens a debate of how aggressive the ECB" may be in
the coming months, Stretch said.
Money markets are pricing in 15 basis points of rate cuts at
the next ECB meeting on Sept. 12, pushing rates further into
negative territory.
Focus is also moving to weekend data from China, especially
its official manufacturing survey, which is expected to show
factory activity contracted in August for the fourth straight
month.
The yuan is set for its biggest monthly decline since 1994.
It has lost about 3.7% against the dollar CNH=D3 after trading
as low as 7.185 this month.
Euro downward trajectory intensifies further https://tmsnrt.rs/2PpNVr1
Monthly FX performance https://tmsnrt.rs/2Pn7gsF
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