* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 2 (Reuters) - The euro weakened half a percent and other high-yielding currencies such as the Australian dollar wilted on Monday as rising concerns over an escalation in the trade dispute between the United States and its partners sapped demand.
The single currency also received a setback after German Chancellor Angela Merkel was dealt a fresh blow when her interior minister offered to quit in an escalating row over migration policy.
“More than the German political developments, the concerns over a rising trade conflict is more worrying for global markets at this stage and that is going to keep risk appetite muted,” said Esther Maria Reichelt, an FX analyst at Commerzbank.
On Monday, the single currency fell 0.5 percent at $1.1633 in early London trading. It racked up its third consecutive monthly loss against the dollar in June.
Tension is growing ahead of a July 6 deadline when Washington is due to impose $34 billion of tariffs on Chinese exports, with two surveys of Chinese manufacturing out in the last few days showed a softening in activity, partly due to softness in exports.
While economists expect the direct economic damage from those tariffs to be relatively contained, at least for now, many see the reversal of globalisation having negative repercussions for years to come, lowering companies’ longer-term growth expectations.
Chinese stock markets fell 2.5 percent while its currency sank to more than seven-month lows as investor concerns grew about a widening trade conflict.
The dollar extended its gains against the yen to hit a fresh six-week high of 111.06 yen.
The Japanese currency was unmoved by the Bank of Japan’s tankan business sentiment survey, which showed a slight dip in big Japanese manufacturers’ sentiment.
The Australian dollar weakened 0.5 percent against the greenback while the Canadian dollar slipped 0.3 percent. (Reporting by Saikat Chatterjee Additional reporting by Hideyuki Sano and Tomo Uetake in TOKYO Editing by Peter Graff)