* Dollar comes off two-year high after U.S. PMI data
* Euro bolstered as Eurosceptics beaten in Dutch vote
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds Theresa May statement, graphic, updates prices)
By Abhinav Ramnarayan
LONDON, May 24 (Reuters) - The dollar edged away from
two-year highs on Friday after weak U.S. manufacturing activity
data sparked worries that the trade conflict with China may hurt
the world's largest economy and affect the currency's safe-haven
status.
Against a basket of six major currencies, the dollar .DXY
was down 0.2% at 97.686 at one stage and 0.7% off a two-year
high of 98.371 hit the previous session.
The fall followed overnight data showing manufacturing
activity hit its lowest level in almost a decade in May,
suggesting a sharp slowdown in U.S. economic growth was under
way. Up to now, the bulk of the pain from the trade war has been
felt in Asia, with economies from Singapore to Thailand all
posting poor numbers.
"Lot of people for good reasons thought trade wars may be
U.S. dollar-positive and other countries cannot retaliate," said
Commerzbank FX strategist Ulrich Leuchtmann.
"But in reality, it's more difficult. This very
disappointing PMI data and other factors like the Huawei story
are all creating stress for the U.S. economy and derailing
sentiment."
President Donald Trump said on Thursday that U.S. complaints
against Huawei Technologies Co Ltd HWT.UL might be resolved
within the framework of a U.S.-China trade deal, while at the
same time calling the Chinese telecommunications giant "very
dangerous". Escalating trade tensions and weak data have fuelled rate
cut expectations from the Fed. Money markets broadly expect one
rate cut by October followed by another by January 2020.
The dollar weakness helped sterling recover slightly from a
4-1/2 month low GBP=D3 while the euro briefly inched above
$1.12 to hit a one-week high EUR=EBS .
Against the yen, the dollar edged down to 109.675 yen
JPY= , extending losses overnight, when it gave up two-thirds
of a percent, its steepest drop in a single session in two
months.
Dollar weakness also helped boost sterling, though the
British currency extended its rally after UK Prime Minister
Theresa May said on Friday she would quit, setting up a contest
that will bring a new prime minister to power who could pursue a
cleaner break with the European Union. It was up a quarter of a percent at $1.2688 around midday in
Britain, moving further away from a 4-1/2 month low hit on
Wednesday. GBP=D3
The euro also benefited from dollar weakness, and might have
also been helped by the Dutch part of the EU parliamentary
elections.
An exit poll showed the Labour party of European
Commissioner Frans Timmermans won a surprise victory over a
Eurosceptic challenger who had been topping opinion surveys.
The euro has been pinned lower in recent weeks by the
prospect of Eurosceptic parties across the continent performing
well in the elections.
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