July 2, 2018 / 3:05 PM / 8 months ago

FOREX-Dollar gains as growing trade tensions lure safe-haven bids

    * Euro falls amid German political setback
    * Trade concerns grow as July 6 deadline approaches
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Updates prices, adds comment, FX table, changes dateline from
    By Gertrude Chavez-Dreyfuss
    July 2 (Reuters) - The dollar started the third quarter on a
positive note on Monday, benefiting from mounting global trade
tensions, as investors scooped up the greenback as a safe-haven
    "For now, mounting fears about a trade war have supported
the dollar, particularly against its higher yielding and riskier
rivals," said Omer Esiner, chief market analyst, at Commonwealth
Foreign Exchange in Washington.
    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 showing a softening in activity, partly due to
softness in exports.
    Rising trade tensions have hit stock markets from Germany to
South Korea and prompted investors to hedge their exposure to
relatively high-yielding currencies such as the Australian
dollar and the Chinese currency.
    Taking note of the rising dollar, BNP Paribas trimmed its
end-2018 forecasts for the euro and sterling.
    In late morning trade, the dollar index was up 0.4 percent
at 95.044
    The dollar further extended gains after the Institute for
Supply Management's manufacturing index showed a reading of
60.2, higher than the market forecast of 60.2, while U.S.
construction spending rose 0.4 percent in May.
    While the ISM report was a positive mark for the dollar,
Michael Pearce, senior U.S. economist at Capital Economics said
the report provided plenty of anecdotal evidence that tariffs
were beginning to disrupt production and were pushing up input
    Latest positioning data remains broadly supportive for the
dollar and is an extension of themes seen in currency markets in
recent days.
    Dollar longs edged higher for a second consecutive week,
euro longs got trimmed again with net outstanding long positions
at their lowest in nearly two months while the Swiss franc
enjoyed some safe-haven support.
    A rising dollar also translates into tightening financial
conditions for broader financial markets given the U.S.
currency's dominance in global financing and trading markets.
    The euro 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.

    On Monday, the euro fell 0.6 percent to $1.1609. It
racked up its third consecutive monthly loss against the dollar
in June.
    The dollar extended its gains against the yen to hit a new
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.
    Currency bid prices at 10:46AM (1446 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1608        $1.1683     -0.64%         -3.23%      +1.1697     +1.1597
 Dollar/Yen       JPY=        110.8000       110.6600    +0.13%         -1.66%      +111.0600   +110.5100
 Euro/Yen         EURJPY=     128.62         129.29      -0.52%         -4.85%      +129.5000   +128.5300
 Dollar/Swiss     CHF=        0.9952         0.9902      +0.50%         +2.15%      +0.9965     +0.9901
 Sterling/Dollar  GBP=        1.3104         1.3207      -0.78%         -3.02%      +1.3209     +1.3096
 Dollar/Canadian  CAD=        1.3197         1.3130      +0.51%         +4.93%      +1.3210     +1.3140
 Australian/Doll  AUD=        0.7337         0.7402      -0.88%         -5.95%      +0.7414     +0.7337
 Euro/Swiss       EURCHF=     1.1554         1.1572      -0.16%         -1.15%      +1.1576     +1.1536
 Euro/Sterling    EURGBP=     0.8855         0.8844      +0.12%         -0.32%      +0.8868     +0.8832
 NZ               NZD=        0.6704         0.6764      -0.89%         -5.38%      +0.6792     +0.6702
 Dollar/Norway    NOK=        8.1936         8.1420      +0.63%         -0.16%      +8.2019     +8.1460
 Euro/Norway      EURNOK=     9.5129         9.5194      -0.07%         -3.41%      +9.5363     +9.4933
 Dollar/Sweden    SEK=        9.0007         8.9465      -0.09%         +9.74%      +9.0288     +8.9451
 Euro/Sweden      EURSEK=     10.4495        10.4588     -0.09%         +6.20%      +10.4735    +10.4360
 (Reporting by Gertrude Chavez-Dreyfuss in New York; Additional
reporting by Saikat Chatterjee in London
Editing by Susan Thomas)
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