LONDON (Reuters) - The euro inched higher on Tuesday after investor sentiment in Germany improved more than expected in August.
The ZEW survey of economic sentiment rose to 71.5 from 59.3 points the previous month, far exceeding a forecast for 58.0 in a Reuters poll of economists.
As a result, euro/dollar gained 0.5% to $1.1809. The move was exacerbated by thin August liquidity, though, said Jane Foley, senior currency analyst at Rabobank, and she was "suspicious" about how much effect the ZEW survey had.
“We need to wait till September to see clear direction coming from euro/dollar,” Foley said.
The euro had been bolstered recently by views that the continent was handling the coronavirus-induced economic slowdown much better than the United States.
In early European trading, the U.S. dollar maintained its gains, amid U.S.-China tensions and a stalemate in the U.S. Congress over fiscal stimulus. But fresh data showing that the rest of the world was outperforming the United States quickly removed those gains.
The dollar earlier at $1.1722, its strongest since Aug. 4. Before that, the dollar had been declining for seven straight weeks.
The dollar was last up 0.1% against the Japanese yen at 106.09 as U.S. 10-year Treasury yields rose to two-week highs before a quarterly U.S. refunding auction on Tuesday.
Congressional leaders and Trump administration officials said on Monday they were ready to resume negotiations on a coronavirus aid deal. It was unclear whether they could bridge their differences.
Meanwhile, China imposed sanctions on 11 U.S. citizens, including Republican lawmakers, following Washington’s sanctions on Hong Kong and Chinese officials.
And U.S. Treasury Secretary Steven Mnuchin said companies from China and other countries that do not comply with accounting standards will be delisted from U.S. stock exchanges as of the end of 2021.
Market response to the U.S.-China conflict has been limited, but analysts say there could be longer-term implications.
“The market remains in the expectation that everything will turn out for the best in the dispute,” Commerzbank currency analyst Antje Praefcke said. But “an agreement has probably already been priced in accordingly, which means that the dollar has hardly any more upside potential.”
“The euro does not really have that much to offer these days, either ... The bottom line is that with $1.19 we probably have seen the highs in euro/dollar for the time being, but at the same time there are no good reasons for levels below $1.16,” Praefcke said.
Elsewhere, the Turkish lira stayed near Friday’s record low on concerns about the country’s dwindling foreign-exchange reserves, leading to expectations the central bank will take more decisive action to stem its fall.
The lira was quoted at 7.2362 per dollar, just above Friday's record low of 7.3650.
The Norwegian crown, on the other hand, has flourished as oil prices rose, becoming the best performer so far this week alongside the Canadian dollar and the Russian rouble, according to MUFG analysts.
The crown was last up 1% at 8.9485 to the dollar, boosted by Monday's central bank report that showed Norges Bank was one of the least dovish G10 central banks.
The Canadian dollar rose 0.5% to $1.3284.
Sterling traded at $1.3121, up 0.4% on the day, after Bank of England Deputy Governor Dave Ramsden said in an interview published on Tuesday the central bank will step up quantitative easing if the British economy struggles again.
Reporting by Olga Cotaga, editing by Larry King and Bernadette Baum