FOREX-Hopes for Brexit delay rally pound, dollar slips on US factory data

* Sterling recovers but under pressure amid Brexit chaos
* Aussie dollar jumps as GDP data meets expectations
* Plummeting pound: https://tmsnrt.rs/2N6T2JO
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Westbrook
SINGAPORE, Sept 4 (Reuters) - The British pound bounced on
Wednesday in the wake of a parliamentary vote opening the door
for another Brexit delay, while the dollar drifted lower after
weak manufacturing data stoked wagers on aggressive U.S. policy
easing.
The greenback's doldrums helped the Australian dollar
AUD=D3 shine when June-quarter economic growth, while soft,
was in line with forecasts, and the currency rose 0.3% to reach
a one-week peak of $0.6775.
Sterling, pushed to a near three-year low on Wednesday,
climbed almost 0.2% against the dollar to $1.2100 and firmed
0.1% against the euro.
"I think there's a real opportunity for the pound," said
Nick Twidale, director at Sydney FX brokerage Xchainge.
He said the rise was driven by British lawmakers voting to
defy Prime Minister Boris Johnson to put a proposal delaying
Britain's exit from the European Union beyond October on
parliament's agenda on Wednesday. "It now opens up the possibility again of, I suppose the
extreme would be a no-Brexit, but a softer Brexit," Twidale
said. "We'd priced in so much of a hard Brexit with Boris
Johnson coming in, that I think there's real opportunity for
some sterling appreciation."
On Tuesday, sterling dropped under $1.20 and hit its lowest
since a flash crash in October 2016 and the outlook is still
pretty cloudy. Johnson has said he will now push for a snap
election, which would add yet another major source of
uncertainty.
The dollar gave up a two-year high touched on Wednesday
against a basket of currencies .DXY to trade at 98.915, giving
ground to the yuan CNY=D3 and steadying against the euro, with
one euro buying $1.0975.
The yen JPY=EBS weakened slightly to 106.11 per dollar
after a Bank of Japan board member said the central bank must
pre-emptively ease monetary policy to fend off risks to the
economy. The dollar's pullback was prompted by manufacturing activity
in the world's biggest economy contracting for the first time in
three years last month, according to data from the Institute for
Supply Management. That knocked the wind out of a previously rising greenback
and rallied the bond market as investors increased bets on a
couple of Federal Reserve rate cuts before Christmas.
A 25-basis-point cut is now fully priced in, while yields on
benchmark 10-year Treasuries US10YT=RR , which fall when prices
rise, dropped to their lowest in two years.
"The expectation that the Fed will come to the rescue has
increased," said Rodrigo Catril, senior FX strategist at
National Australia Bank in Sydney.
"But it's not a capitulation on the dollar. It's just merely
stopped the recent rise of the dollar."
The dollar's weakness help pull the yuan CNY=D3 from an
11-year low to reach 7.1669 per dollar. Its rise was tempered as
traders kept a wary eye on trade risks, with U.S. President
Donald Trump promising a tougher line on Beijing if trade talks
drag on.