September 3, 2019 / 7:14 PM / 12 days ago

FOREX-Dollar flat as poor U.S. factory data offset 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; adds quote, graphic)
    By Richard Leong
    NEW YORK, Sept 3 (Reuters) - The dollar was little changed
on Tuesday against a basket of currencies, underpinned by
safe-haven demand on worries about U.S.-China trade tensions and
a chaotic British exit from the European Union.
    Initial strength that propelled the dollar to a more than
two-year peak faded following a private report that showed the
U.S. manufacturing sector in August recorded its first monthly
contraction since 2016.
    "That's a reflection on what has been going on on the trade
front," said Don Ellenberger, head of multi-sector strategies at
Federated Investors in Pittsburgh.
    The steeper-than-expected decline in the factory activity
index of the Institute for Supply Management touched off a rally
in the U.S. bond market, sending benchmark 10-year yields
 to their lowest levels since July 2016.
  
    Bloomberg News reported that Chinese and U.S. officials were
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.
    In late U.S. trading, the dollar index, which tracks
the greenback against versus six major currencies, was up 0.05%
at 98.964. Earlier, it hit 99.37, its highest level 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 the ECB
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 at  $1.0966, after
hitting $1.0926 earlier, its lowest level 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 the disappointing ISM
manufacturing data. The greenback fell 0.2% to 106.045 yen and
decreased 0.3% to 0.98745 franc.
    Sterling was last up 0.22% at $1.209 after falling
to $1.1959, the lowest level 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 2:54PM (1854 GMT)
 Description     RIC        Last          U.S.       Pct Change    YTD Pct    High Bid   Low Bid
                                          Close                     Change               
                                           Previous                                      
                                           Session                                       
 Euro/Dollar     EUR=       $1.0966       $1.0966    +0.00%        -4.39%     +1.0978    +1.0927
 Dollar/Yen      JPY=       106.0300      106.2100   -0.17%        -3.84%     +106.3800  +105.7500
 Euro/Yen        EURJPY=    116.26        116.49     -0.20%        -7.89%     +116.5600  +115.8800
 Dollar/Swiss    CHF=       0.9873        0.9905     -0.32%        +0.60%     +0.9928    +0.9864
 Sterling/Dolla  GBP=       1.2090        1.2066     +0.20%        -5.23%     +1.2105    +1.1959
 r                                                                                       
 Dollar/Canadia  CAD=       1.3319        1.3325     -0.05%        -2.33%     +1.3382    +1.3323
 n                                                                                       
 Australian/Dol  AUD=       0.6757        0.6713     +0.66%        -4.14%     +0.6763    +0.6688
 lar                                                                                     
 Euro/Swiss      EURCHF=    1.0828        1.0866     -0.35%        -3.79%     +1.0869    +1.0821
 Euro/Sterling   EURGBP=    0.9070        0.9091     -0.23%        +0.96%     +0.9148    +0.9052
 NZ              NZD=       0.6325        0.6306     +0.30%        -5.84%     +0.6328    +0.6270
 Dollar/Dollar                                                                           
 Dollar/Norway   NOK=       9.1055        9.1003     +0.06%        +5.40%     +9.1632    +9.0986
 Euro/Norway     EURNOK=    9.9850        9.9832     +0.02%        +0.80%     +10.0213   +9.9790
 Dollar/Sweden   SEK=       9.8281        9.8274     -0.03%        +9.64%     +9.8934    +9.8206
 Euro/Sweden     EURSEK=    10.7771       10.7799    -0.03%        +5.00%     +10.8225   +10.7709
 
    
 

    
 (Reporting by Richard Leong;
Additional reporting by Olga Cotaga in London
Editing by Lisa Shumaker and Leslie Adler)
  
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