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Dollar gains before manufacturing data, euro crumbles on German inflation

Venezuela, República Dominicana, FVI
Dollar gains before manufacturing data, euro crumbles on German inflation

TOKYO (Reuters) – The U.S. dollar traded near its highest in almost two weeks versus the yen before the release of data that is forecast to show the U.S. manufacturing sector returned to growth, which would ease concern about the impact of the ongoing Sino-U.S. trade war.

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FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won The euro teetered near its lowest in more than two years versus the greenback as weak economic data from Germany reinforced expectations that monetary policy in the euro zone will remain accommodative for an extended period.

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The Australian dollar edged lower before an expected interest rate cut from the Reserve Bank of Australia (RBA) later on Tuesday.

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A host of economic data and comments from central bankers this week will set the tone for major currencies as traders try to determine how far policymakers go to bolster growth.

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“Economic data can be supportive of the dollar, and the Federal Reserve’s comments are not as dovish as some people think,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo

“An RBA rate cut and the risk of a stagnant European economy both should be positive for the greenback.”

The dollar traded at 107.85 yen JPY=EBS early in Asia, close to its strongest level in almost two weeks

The yen remained weak after the Bank of Japan’s tankan showed business confidence in the third quarter slid to its lowest in six years

Trading could be subdued in Asian time because China’s financial markets are closed until Monday for public holidays

The dollar index .DXY against a basket of six major currencies rose 0.03% to 99.402, approaching the highest in more than two years

The Institute for Supply Management’s measure of U.S. manufacturing activity due later on Tuesday is forecast to show a return to expansion in September, but just barely

In August U.S. manufacturing activity contracted for the first time in three years due to the U.S.-China trade war

Several Fed policymakers are scheduled to speak this week, but traders said they will focus most on comments from Fed Chairman Jerome Powell on Friday for hints about the direction of U.S. monetary policy

The Fed has cut interest rates twice this year, but there are signs that the Fed is reluctant to ease policy further because the jobs market remains strong

The euro stood at $1.0900 EUR=EBS in Asia, nursing a 0.4% decline in the previous session when it slid to $1.0885, which is the lowest since May 12, 2017

Annual inflation in Germany, Europe’s largest economy, slowed to the lowest in almost three years, data on Monday showed

The European Central Bank unleashed a new round of monetary easing measures on Sept. 12, but there is growing concern that the central bank is reaching the limits of what it can achieve and the burden will fall to eurozone governments to boost fiscal spending

The Australian dollar fetched $0.6751 AUD=D3 , down 0.02% in early trade

Australia’s central bank is all but certain to cut its cash rate to a record low of 0.75% on Tuesday and will likely ease again in early 2020 to boost inflation and support a stuttering economy, a Reuters poll showed

The New Zealand dollar traded at $0.6264 NZD=D3 , which is within striking distance of a four-year low. The kiwi has taken a hit as weakening business confidence bolstered expectations for monetary easing

Reporting by Stanley White; Editing by Christopher Cushing