FOREX-Euro skids as German economic gloom deepens

* German flash PMI worse than expected in Sept
* Yen undermined by hopes for U.S.-China trade talks
* China's yuan, Aussie, make some gains
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, Sept 23 (Reuters) - The euro fell on Monday after
German flash purchasing managers' index survey data for
September was weaker than expected, raising more fears about the
health of the economy.
The single currency, trading around $1.10 before the numbers
were released, dropped 0.4% to as weak as $1.0972 EUR=EBS , its
weakest since Sept. 12.
The survey showed that the German private sector activity
shrank for the first time in 6-1/2 years in September as a
manufacturing recession deepened unexpectedly and growth in the
service sector lost momentum. The dollar was boosted by the euro's decline, and its index
- which measures the greenback against a basket of currencies -
was last up 0.3% at 98.776 .DXY .
Increasing talk of fiscal stimulus in the euro zone has
raised bond yields in the region, although not all analysts see
much of a boost for the single currency in the context of
concerns about global trade and slowdown fears.
"We see little upside scope for EUR/USD here," MUFG analysts
said in a note.
Elsewhere, foreign exchange markets were mostly quiet,
though there were some signs of risk appetite as Japan's yen
weakened against higher-yielding FX after talks in Washington
between U.S. and Chinese trade deputies were described as
"productive".
Volumes in Asia were dampened by a public holiday in Japan.
A U.S.-China trade breakthrough had seemed unlikely after
President Donald Trump told reporters on Friday he was "not
looking" for a partial deal, and Chinese officials then
cancelled goodwill visits to U.S. farmers. But both sides later published positive statements, with the
U.S. Trade Representative's office describing the talks as
"productive" and China's Commerce Ministry calling them
"constructive." October's high-level talks remain on track.
The yen was last down 0.2% at 107.75 yen per dollar
JPY=EBS .
China's yuan added 0.1% to 7.112 yuan in offshore markets
CNH=EBS .
The Australian dollar rose 0.1% to $0.6772 AUD=D3 , while
against the yen it rallied 0.4% AUDJPY=D3 and was on track for
its best day since Sept. 12.
Despite the more positive tone in forex markets on Monday,
investors remain nervous about the geopolitical outlook, and
equity markets fell in early trading.
"I think there's still a lot of nervousness around," said
Shane Oliver, chief economist at AMP Capital, citing Middle East
tensions and the U.S-China trade dispute as drivers.
"These things have a habit of escalating and de-escalating
and then escalating again...it is a bit finely balanced at the
moment," he said.
Sterling slipped slightly to $1.2459 GBP=D3 .