* Dollar off two-year high after weak capital goods, PMI data
* Euro bolstered by defeat of euroskeptics in Dutch vote
* Graphic: World FX rates in 2019
(Recasts; updates prices; changed dateline, LONDON previous)
By Kate Duguid
NEW YORK, May 24 (Reuters) - The dollar fell on Friday from a
two-year high after orders for U.S.-made capital goods fell, further
evidence that manufacturing and the broader economy are slowing, due
in part to the trade conflict with China.
The weaker-than-expected data, a closely watched proxy for
business spending plans, added to the dollar's fall, which began
Thursday following a report that showed manufacturing activity hit its
lowest level in almost a decade in May. Together, the reports
suggested a sharp slowdown in U.S. economic growth was under way,
which could affect the dollar's safe-haven status.
Against a basket of six major currencies, the dollar was down
0.16% at 97.698 and 0.69% off a two-year high of 98.371 hit the
"Lot of people for good reasons thought trade wars may be
U.S. dollar-positive and other countries cannot retaliate," said
Commerzbank FX strategist Ulrich Leuchtmann.
"But in reality, it's more difficult. This very disappointing
PMI data and other factors like the Huawei story are all creating
stress for the U.S. economy and derailing sentiment."
China on Friday denounced U.S. Secretary of State Mike Pompeo for
fabricating rumors after he said the chief executive of China's Huawei
Technologies Co Ltd was lying about his company's ties to the
Escalating trade tensions and weak data have fuelled rate cut
expectations by the Fed. Money markets broadly expect one rate cut by
October followed by another by January 2020.
Dollar weakness also helped boost sterling from a 4-1/2 month low
, though the rally was primarily driven by UK Prime Minister Theresa
May's announcement on Friday that she would quit, setting up a contest
that will bring a new prime minister to power who could pursue a
cleaner break with the European Union. It was last up 0.14% at $1.267.
The euro was also stronger on Friday, up 0.18% to $1.20 benefiting
from the dollar's weakness, and from the Dutch part of the EU
parliamentary elections. An exit poll showed the Labour party of
European Commissioner Frans Timmermans won a surprise victory over a
euroskeptic challenger who had been topping opinion surveys.
The single currency is down 2.3% this year, which led analysts at
Bank of America to change their forecast of the euro's price at the
end of 2019 from $1.20 to $1.17.
(Reporting by Kate Duguid and Abhinav Ramnarayan Editing by Nick Zieminski)
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