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.

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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 eur

The dollar extended its gains against the yen to hit a new six-week high of 111.06 yen jpy

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

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)