FOREX-Pain in Asia pushes dollar to 2-1/2 week high as investors seek safety

Reuters

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    * Poor data from Singapore, Thailand, pushes investors to
dollar
    * Greenback hits 2-1/2 week high against basket of
currencies
    * Aussie down as RBA governor signals possible June rate cut
    * Euro at lowest since May 3 ahead of EU vote
    * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

 (Adds quote, updates prices)
    By Abhinav Ramnarayan
    LONDON, May 21 (Reuters) - Signs that Asia is already
feeling the pinch from a trade conflict between the United
States and China triggered some safe haven flows into the U.S.
dollar on Tuesday, while higher U.S. Treasury yields helped the
move. 
    Data showed economic growth in Singapore was its lowest in
nearly a decade in the first quarter, while in Thailand it was
at its lowest in four years, raising worries that major Asian
economies will be hurt by global trade tensions.  urn:newsml:reuters.com:*:nL4N22X01A
 urn:newsml:reuters.com:*:nL3N22M1LW
    Elsewhere, Australia's top policymaker Philip Lowe said on
Tuesday the Reserve Bank of Australia would consider the case
for lower interest rates at its June policy meeting, pushing the
Aussie dollar  AUD=D3  half a percent lower to $0.6873.
 urn:newsml:reuters.com:*:nS9N21I00V
    "The situation in Asia is difficult - Thailand, Singapore,
export decline in Korea - which shows that the trade conflict is
hurting even without a further escalation," said Commerzbank FX
strategist Esther Maria Reichelt.        
    "This is the main cause behind the dollar strength, if
anything I was little bit surprised we didn't see a more
pronounced risk movement," she added. 
    The dollar hit a 2-1/2 week high against a basket of six
major currencies, rising 0.2% to a high of 98.11  .DXY . 
    "The Fed turned (dovish) and you would expect the dollar to
weaken but for the fact that every central bank and his dog are
doing the same, so the upside to the dollar is reinforced by the
other central banks," said Neil Mellor, an FX strategist at BNY
Mellon. 
    "Also the dollar rightly or wrongly does have a reputation
as a safe-haven play. Every country will be expected to suffer
on back of the trade war but the dollar has a status as a liquid
safe haven."
    The greenback may have also been helped by higher U.S.
Treasury yields, with the 10-year yield  US10YT=RR  rising to a
one-week high of 2.428% on the back of some positive comments on
the U.S. economy from policymakers.  US/ 
    Yields also rose as the U.S. government temporarily eased
trade restrictions imposed last week on China's Huawei, a move
aimed at minimising disruption for its customers.  urn:newsml:reuters.com:*:nL2N22W19U  
  
    Conversely, the euro -- which makes up a significant chunk
of that basket -- hit a 2-1/2 week low of $1.1142  EUR=EBS ,
down 0.2% on the session. 
    The single currency is being hurt by dollar strength and
also by upcoming European parliamentary elections in which
eurosceptic parties may fare well. 
    A successful outing for right-wing Italian parties in
particular could mean new domestic elections in the euro zone's
third-largest economy, and potentially a new coalition of
right-wing parties led by Matteo Salvini's League. 
    "That would be decidedly negative for the euro, because
Salvini has been much less willing to abide by EU rules -- he
recently said he'd break the EU's budget deficit rules if
necessary to get employment up," said Marshall Gittler, a
strategist at ACLS Global. 
    Sterling  GBP=D3  fell below $1.27 for the first time since
mid-January ahead of a UK cabinet meeting in which senior
ministers will consider the merits of whether lawmakers should
hold indicative votes on Brexit options.  urn:newsml:reuters.com:*:nL9N1Z700R

 (Reporting by Abhinav Ramnarayan
Editing by Catherine Evans)

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