Dollar edges up on trade, political worries

NEW YORK (Reuters) - The dollar edged higher against a basket of currencies on Tuesday, lifted by trade and political worries and a strong rise in U.S. consumer confidence, even as longer-dated U.S. bond yields dropped to 19-month lows.

A man counts U.S dollars and Euros at a money exchange office in central Cairo, Egypt, December 27, 2016. REUTERS/Mohamed Abd El Ghany

The euro slipped as investors were relieve that pro-Europe parties won a majority of European parliamentary seats, but they remained uneasy about the future of the economic bloc as eurosceptic and right-wing parties gained seats.

Currency trading remained light even as U.S. and U.K.-based traders returned from holidays.

“It’s a bit of a flight-to-quality environment so that’s benefiting the dollar a bit,” said Chuck Tomes, associate portfolio manager at Manulife Asset Management in Boston.

The greenback strengthened further after the Conference Board said its gauge on U.S. consumer confidence rose to 134.1 in May, the strongest since November. Analysts had forecast a reading of 130.00.

In late U.S. trading, an index that tracks the greenback against the euro, yen, sterling and three other currencies was 0.19% higher at 97.919.

The dollar index reached a two-year peak at 97.908 last week.

Earlier, benchmark 10-year Treasury yields fell to 2.264% after U.S. President Donald Trump signalled the United States and China were far from a trade deal. It was the lowest 10-year yield since October 2017. Investors have been loading up on safe-haven U.S. government debt due to trade worries and political uncertainty.

Italian Deputy Prime Minister Matteo Salvini, whose far-right League triumphed in European elections on Sunday, said the European Commission could fine Italy 3 billion euros for breaking EU debt and deficit rules, a comment that weighed on the single currency.

The euro has recovered, holding steady at $1.1169 and 122.285 yen.

The euro hit a near 23-month low of $1.11055 last week.

(For graphic on Euro vs U.S. dollar, click

European leaders now meet in Brussels to begin the process of filling a number of top EU posts, from the head of the European Commission to the European Central Bank.

The yen was little changed at 109.475 per dollar as U.S. President Donald Trump said on Monday he expected Japan and the United States to announce a trade agreement “probably in August.”

Additional reporting by Tommy Wilkes in LONDON; Editing by David Gregorio and Lisa Shumaker