FOREX-Dollar bides time ahead of U.S. manufacturing, jobs data

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Dollar up versus yen but weak against commodity currencies
* U.S. economy is improving but coronavirus remains a risk
* Mixed signals stymie trade in euro

By Stanley White
TOKYO, July 1 (Reuters) - The dollar held steady against the
euro on Wednesday ahead of data expected to show U.S.
manufacturing activity and hiring continued to recover from the
economic shock caused by the coronavirus pandemic.
The euro was hemmed into a narrow range as traders awaited
data on Germany's manufacturing sector, retail sales, and the
jobless rate to gauge the health of the eurozone economy.
The yen firmed slightly on safe-haven flows after a top
government spokesman said Japan could re-impose a state of
emergency in response to the coronavirus. A surge in new infections in the U.S. south and southwest
has worried some market participants, but most investors are
betting this will not be enough to derail a broader rebound in
the global economy.
"The dollar will be supported against the yen if U.S.
economic data are positive, but U.S. yields are not rising much
because of speculation about yield curve control," said Shusuke
Yamada, head of foreign exchange and Japan equity strategy at
Merrill Lynch Japan Securities.
"The euro looks stable, but there are questions about Brexit
and the pace of economic reopening, which means the euro could
soon be overvalued."
The euro EUR=D3 held steady at $1.1223. Against the
British pound, the common currency EURGBP= traded at 90.77
pence following a 0.9% decline on Tuesday.
The yen edged up to 107.63 per dollar JPY= , pulling back
from a three-week low.
The yen barely reacted after Bank of Japan data showed
business sentiment fell to an 11-year year low. Sterling GBP=D3 bought $1.2367, surrendering some of the
previous day's gains due to worries about Britain's trade
negotiations with the European Union.
The U.S. Institute for Supply Management's purchasing
managers' index (PMI) for manufacturing due later on Wednesday
is forecast to show that activity in June continued to recover
from an 11-year low marked in April, when the coronavirus
paralysed large swathes of the global economy.
Investors also await the closely-watched U.S. nonfarm
payrolls report on Thursday, which is expected to show the
economy added 3 million jobs in June.
The onshore yuan CNY=CFXS was little changed at 7.0654 per
dollar after the People's Bank of China cut the re-discount and
re-lending rates to reduce funding costs for small firms.
Some investors are wary of diplomatic tensions over
Beijing's new security law for the former British colony of Hong
Kong, which came into effect on Wednesday. The dollar has failed to make headway against commodity
currencies recently, showing that some investors remain wary of
downside risks.
Normally Treasury yields would rise due to an improving
economy, but benchmark 10-year yields US10YT=RR have moved in
a narrow range around 0.65% since mid-June, when Federal Reserve
Chairman Jerome Powell said policymakers discussed yield curve
control, which can be used to cap bond yields. The Australian dollar AUD=D3 bought $0.6891 on Wednesday
following a 0.5% gain on Tuesday.
The New Zealand dollar NZD=D3 stood at $0.6443, also
holding onto gains from the previous session.
The Swiss franc CHF=D3 , a currency traditionally sought as
a safe haven during times of heightened risk, also perked up
against the greenback, which shows that positive economic data
alone is not enough to support broad-based dollar gains.
The euro has lacked conviction amid mixed signals about the
eurozone economy and limited progress in talks on the future
trade relationship between Britain and the EU.
Data due later on Wednesday from Germany are expected to
show retail sales in Europe's largest economy fell at a slower
pace but the manufacturing sector continued to contract, which
could hurt sentiment for the euro.

(Editing by Sam Holmes and Jacqueline Wong)