September 3, 2019 / 4:01 PM / 16 days ago

FOREX-Dollar edges higher on trade, Brexit worries

    * Pound recovers after dropping below $1.20 on Brexit
jitters
    * Dollar index hits highest level since May 2017
    * U.S. factory sector contracts for first time since 2016 -
ISM
    * U.S. Treasury yields fall toward recent mid-2016 low
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, Sept 3 (Reuters) - The dollar climbed on Tuesday
to its strongest level in over two years against a basket of
currencies as traders favored the greenback on worries about
U.S.-China trade tensions and a chaotic British exit from the
European Union.
    The dollar's initial gains abated in the wake of a private
report that showed the U.S. manufacturing sector recorded its
first monthly contraction since 2016 in August.
    Last month's steeper-than-expected decline in the factory
activity index from Institute for Supply Management also touched
off a rally in the U.S. bond market, sending benchmark 10-year
yields to their lowest levels since July 2016.
   
    "This is a safe-haven trade rather than a rate-differential
trade," said Steven Englander, global head of G10 FX research at
Standard Chartered in New York.
    Bloomberg News reported that Chinese and U.S. officials are
struggling to agree on a schedule for a round of trade
negotiations that had been expected this month.
    UK Prime Minister Boris Johnson lost his working majority in
parliament when one of his Conservative lawmakers defected to
the pro-European Union Liberal Democrats.
    At 11:44 a.m. (1544 GMT), an index that tracks the dollar
versus six major currencies was up 0.11% at 99.022. It
hit 99.37 earlier Tuesday, which was its highest since May 2017.
    The euro stabilized after tumbling to a 28-month low against
the dollar earlier Tuesday as investors priced in deeper
negative interest rates for longer in the euro zone.
    Money markets have increased to more than 80% the
probability that the European Central Bank will cut its
benchmark rate by 20 basis points when it meets next week. 
    The ECB benchmark rate now stands at minus 0.40% and it has 
all but promised a monetary policy stimulus package as economic
growth falters. Monday's PMI survey showed European
manufacturing contracted for seven straight
months.
    The euro was little changed on the day at 
$1.09645. It fell to $1.0926 earlier, its lowest since mid-May
2017. A break below the key $1.1000 level last week had sparked
heavier sell-offs.
    The dollar weakened against the yen and the Swiss franc in
the aftermath of disappointing ISM manufacturing data.
    The greenback fell 0.37% to 105.87 yen and decreased 0.31%
to 0.98735 franc.
    Sterling was last up 0.2% at $1.2087 after falling
to $1.1959, the lowest since October 2016, when it plunged to
$1.1491 in a flash crash. Against the euro, sterling rose to 
90.7 pence, rebounding from a two-week low of 91.47 pence
.  
========================================================
    Currency bid prices at 11:43AM (1543 GMT)
 Description     RIC        Last          U.S.       Pct Change    YTD Pct    High Bid   Low Bid
                                          Close                     Change               
                                           Previous                                      
                                           Session                                       
 Euro/Dollar     EUR=       $1.0964       $1.0966    -0.02%        -4.40%     +1.0978    +1.0927
 Dollar/Yen      JPY=       105.8700      106.2100   -0.32%        -3.99%     +106.3800  +105.7500
 Euro/Yen        EURJPY=    116.07        116.49     -0.36%        -8.04%     +116.5600  +115.8800
 Dollar/Swiss    CHF=       0.9874        0.9905     -0.31%        +0.61%     +0.9928    +0.9865
 Sterling/Dolla  GBP=       1.2090        1.2066     +0.20%        -5.23%     +1.2102    +1.1959
 r                                                                                       
 Dollar/Canadia  CAD=       1.3331        1.3325     +0.05%        -2.24%     +1.3382    +1.3323
 n                                                                                       
 Australian/Dol  AUD=       0.6756        0.6713     +0.64%        -4.16%     +0.6758    +0.6688
 lar                                                                                     
 Euro/Swiss      EURCHF=    1.0828        1.0866     -0.35%        -3.79%     +1.0869    +1.0821
 Euro/Sterling   EURGBP=    0.9067        0.9091     -0.26%        +0.91%     +0.9148    +0.9052
 NZ              NZD=       0.6323        0.6306     +0.27%        -5.87%     +0.6326    +0.6270
 Dollar/Dollar                                                                           
 Dollar/Norway   NOK=       9.1054        9.1003     +0.06%        +5.38%     +9.1632    +9.0986
 Euro/Norway     EURNOK=    9.9833        9.9832     +0.00%        +0.78%     +10.0213   +9.9790
 Dollar/Sweden   SEK=       9.8420        9.8274     +0.13%        +9.80%     +9.8934    +9.8239
 Euro/Sweden     EURSEK=    10.7937       10.7799    +0.13%        +5.16%     +10.8225   +10.7709
 
    
 
      

    
 (Reporting by Richard Leong;
Additional reporting by Olga Cotaga in LONDON
Editing by Frances Kerry and Lisa Shumaker)
  
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