* Euro falls to one-year lows vs USD on QE speculation
* Dollar breaks above 105 yen for first time since January
* Dollar index highest since July 2013 as U.S. yields rise
* Sterling hit by growing support for Scotland "yes" vote
(Updates market action, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, Sept 2 The euro sagged on Tuesday to
fresh one-year lows against the dollar on bets the European
Central Bank will do more to help a wobbly euro zone economy,
while the pound fell to a near five-month low versus the
greenback on worries about a Scottish secession.
The dollar rose against a basket of major currencies,
hitting its highest since July 2013. It traded above 105 yen
for the first time in eight months on signs of relative
strength in the world's biggest economy.
The ECB will hold a policy meeting on Thursday and traders
will watch for signs President Mario Draghi is moving towards
quantitative easing, which would pump more cash into the economy
in a bid to stimulate lending and spending.
Such a move however would hurt the euro, which has declined
3.4 percent against the dollar in the past three months and 1.1
percent against the yen.
"For the ECB, expectations for further stimulus are being
restrained by the need to see a full implementation of measures
announced in June, as well as some concerns about the lack of
political support for more aggressive stimulus at this time,"
said Eric Theoret, Scotia Bank's currency strategist in Toronto.
Monday's disappointing regional economic data stoked
speculation on the ECB adopting QE later this week.
Some, however, said the market might be expecting too much
from Thursday's ECB meeting, even if further easing might be
announced later down the line.
The euro hit a trough of $1.3110 on trading
platform EBS on Tuesday, its lowest since September 2013, before
recovering to $1.3128 in early U.S. trading, little changed from
U.S. financial markets were closed on Monday for the Labor
The greenback also gained against other major currencies as
U.S. yields rose and Wall Street stock prices opened higher.
Data supported the view the U.S. economy continues to expand
at a modest pace. The Institute for Supply Management said its
U.S. manufacturing activity index rose to 59.0 in August, the
strongest since March 2011. July construction spending posted
its highest level in over 5-1/2 years.
The dollar hit its highest since November against the Swiss
franc, rising to 0.9200 franc after data showed the Swiss
economy stalled in the second quarter.
The British pound sank on a poll that showed support growing
for the "yes" vote in a referendum later this month that could
see Scotland splitting from the rest of the UK.
The pound fell almost a cent to as low as $1.6510,
close to a five-month low of $1.6501.
One-month sterling/dollar implied volatility rose to 6.125
percent, its highest in five months.
(Additional reporting by Jemima Kelly in London, Lisa Twaronite
in Tokyo and Ian Chua in Sydney; Editing by Alison Williams,
Susan Fenton and Meredith Mazzilli)