FOREX-Dollar rises as trade tensions attract safe-haven bids

    * Euro falls amid German political setback
    * Trade concerns grow as July 6 deadline approaches
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Updates prices, FX table, adds comment)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 2 (Reuters) - The dollar started the third
quarter on a positive note on Monday, benefiting from mounting
global trade tensions and political developments in Europe, as
investors scooped up the greenback as a safe-haven bet.
    Tension is growing ahead of a July 6 deadline when
Washington is due to impose $34 billion of tariffs on Chinese
exports, with two surveys of Chinese manufacturing out in the
last few days showing a softening in activity, partly due to
softness in exports.
    Meanwhile, German Chancellor Angela Merkel was dealt a fresh
blow when her interior minister offered to quit in an escalating
row over migration policy, pushing the euro lower.
    "The dollar seems to have benefited from safe-haven flows
... as trade tensions and political developments in Europe have
reduced investors' appetite for risk," said Oliver Jones, market
economist at Capital Economics in London.
    But Jones noted that even if global and trade worries ease,
the dollar will remain supported.
    "Given the outlook for U.S. monetary policy, we think that
the currency will be supported by another pick-up in Treasury 
yields this year should a full-blown trade war be avoided,"
Jones said. 
    Taking note of the rising dollar, BNP Paribas trimmed its
end-2018 forecasts for the euro and sterling.
    In afternoon trading, the dollar index was up 0.4 percent at
95.048
    The dollar further extended gains after the Institute for
Supply Management's manufacturing index showed a reading of
60.2, higher than the market forecast of 60.2, while U.S.
construction spending rose 0.4 percent in May.
    "The ongoing good news should make manufacturers happy, and
continues to suggest robust gains in the second half," said
Michael Montgomery, U.S. economist, at IHS Markit.
    Latest positioning data remains broadly dollar-supportive
and is an extension of themes seen in currency markets in recent
days.
    Dollar longs edged higher for a second consecutive week,
euro longs got trimmed again with net outstanding long positions
at their lowest in nearly two months while the Swiss franc
enjoyed some safe-haven support.
    A rising dollar also translates into tightening financial
conditions for broader financial markets given the U.S.
currency's dominance in global financing and trading markets.
    

    GERMAN CONCERNS
    The euro fell 0.6 percent to $1.1615 on concerns over
political developments in Germany. It racked up its third
consecutive monthly loss against the dollar in June.
    The dollar extended its gains against the yen to hit a new
six-week high of 111.06 yen, pressured by the Bank of
Japan's tankan business sentiment survey, which showed a slight
dip in big Japanese manufacturers' sentiment.
    
    ========================================================
    Currency bid prices at 3:06PM (1906 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1614        $1.1683     -0.59%         -3.19%      +1.1697     +1.1592
 Dollar/Yen       JPY=        110.8300       110.6600    +0.15%         -1.63%      +111.0600   +110.5100
 Euro/Yen         EURJPY=     128.73         129.29      -0.43%         -4.77%      +129.5000   +128.4300
 Dollar/Swiss     CHF=        0.9943         0.9902      +0.41%         +2.05%      +0.9965     +0.9901
 Sterling/Dollar  GBP=        1.3124         1.3207      -0.63%         -2.87%      +1.3209     +1.3096
 Dollar/Canadian  CAD=        1.3195         1.3130      +0.50%         +4.91%      +1.3224     +1.3140
 Australian/Doll  AUD=        0.7321         0.7402      -1.09%         -6.15%      +0.7414     +0.7312
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1551         1.1572      -0.18%         -1.18%      +1.1576     +1.1536
 Euro/Sterling    EURGBP=     0.8849         0.8844      +0.06%         -0.38%      +0.8868     +0.8832
 NZ               NZD=        0.6699         0.6764      -0.96%         -5.46%      +0.6792     +0.6690
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.1895         8.1420      +0.58%         -0.21%      +8.2019     +8.1460
 Euro/Norway      EURNOK=     9.5129         9.5194      -0.07%         -3.41%      +9.5363     +9.4933
 Dollar/Sweden    SEK=        8.9840         8.9465      -0.22%         +9.54%      +9.0288     +8.9451
 Euro/Sweden      EURSEK=     10.4358        10.4588     -0.22%         +6.06%      +10.4735    +10.4330
 
    
 (Reporting by Gertrude Chavez-Dreyfuss in New York
Editing by Susan Thomas)
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