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US dollar extends gains as trade war fears nag

London

THE US dollar rose against its rivals on Monday, extending a two-week run, as investors unwound some short dollar bets on worries an escalating trade conflict between the United States and China may trigger buying of US dollar assets.

Most of its gains were chalked up against the Asian currencies with the Chinese yuan holding near the day's lows against the greenback after a media report that China was evaluating the potential impact of a gradual yuan depreciation as a tool in the escalating trade dispute.

The US dollar rose 0.2 per cent against a basket of currencies extending earlier gains. Over a two-week period it is up nearly 1.5 per cent. It rose about 0.2 per cent against the Japanese yen.

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Trade war concerns have prompted investors to trim their record bearish bets against the greenback, with latest positioning data showing that net short bets against the US dollar have fallen for the second week.

UBS strategists say a trade war would hurt Asian exports and prompt outflows from export-oriented equity markets such as Singapore, Malaysia and Taiwan.

Chinese state researchers and media have talked down the likely impact of US trade measures on the world's second largest economy and described the Trump administration's posturing on trade as the product of an "anxiety disorder".

The US dollar index set a one-month high of 90.597 ahead of the US nonfarm payrolls report data on Friday but later lost some steam, weighed down by concerns about the US-China trade dispute and disappointing US jobs data.

Meanwhile, the euro was broadly stable despite two latest survey points that added to the latest bunch of lacklustre headlines from the eurozone. German exports plunged unexpectedly in February, posting their biggest monthly drop for more than two years while a survey showed that investor morale in the eurozone deteriorated for the third month in April. The single currency was broadly flat at US$1.2268 and has been trapped in a broad US$1.215 to US$1.255 range for the last two months.

Elsewhere, sterling was holding its own and edged higher against a broadly strong US dollar as strong housing data from mortgage lender Halifax virtually sealed the case for a rate hike next month. REUTERS