Last month's steeper-than-expected decline in the factory activity index from Institute for Supply Management also touched off a rally in the US bond market, sending benchmark 10-year yields to their lowest levels since July 2016. "This is a safe-haven trade rather than a rate-differential trade," said Steven Englander, global head of G10 FX research at Standard Chartered in New York.
Bloomberg News reported that Chinese and US officials are struggling to agree on a schedule for a round of trade negotiations that had been expected this month. UK Prime Minister Boris Johnson lost his working majority in parliament when one of his Conservative lawmakers defected to the pro-European Union Liberal Democrats. At 11:44 am (1544 GMT), an index that tracks the dollar versus six major currencies was up 0.11% at 99.022. It hit 99.37 earlier Tuesday, which was its highest since May 2017.
The euro stabilized after tumbling to a 28-month low against the dollar earlier Tuesday as investors priced in deeper negative interest rates for longer in the euro zone. The euro was little changed on the day at $1.09645. It fell to $1.0926 earlier, its lowest since mid-May 2017. A break below the key $1.1000 level last week had sparked heavier sell-offs.
The dollar weakened against the yen and the Swiss franc in the aftermath of disappointing ISM manufacturing data. The greenback fell 0.37% to 105.87 yen and decreased 0.31% to 0.98735 franc. Sterling was last up 0.2% at $1.2087 after falling to $1.1959, the lowest since October 2016, when it plunged to $1.1491 in a flash crash. Against the euro, sterling rose to 90.7 pence, rebounding from a two-week low of 91.47 pence.