NEW YORK (Reuters) - The U.S. dollar rose broadly and investors shunned emerging market currencies on Tuesday, as concerns about a possible escalation in the trade conflict between the United States and China boosted safe-haven demand for the greenback.
The dollar index <.DXY>, which measures the greenback against a basket of six currencies, was up 0.34 percent at 95.464. It rose to a two-week high of 95.737, earlier in the session.
"This is just a continuation of the big trends," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
"By the middle of last week we were looking at renewed trade tensions and we were looking at economic data supporting ideas of a Fed rate hike," he said.
U.S. manufacturing activity accelerated to more than a 14-year high in August, boosted by a surge in new orders.
"Where we are now is that the underlying dollar up-trend is resuming," said Chandler.
The public comment period on a U.S. proposal for new tariffs on Chinese goods is set to end on Thursday, after which U.S. President Donald Trump can follow through on plans to impose tariffs on $200 billion more of Chinese imports, though it is unclear how quickly that will happen.
U.S.-Canada trade talks ended on Friday with no deal to revamp the North American Free Trade Agreement after the mood soured, and President Donald Trump notified Congress of his intent to sign a bilateral trade pact with Mexico.
The Canadian dollar weakened to a six-week low against its U.S. counterpart amid an uncertain outlook for Canada's trading arrangement with the United States.
"My sense would be Trump is focused on Mexico, but he is not in any mood to compromise on Canada, Europe or China," said Chandler.
Emerging market currencies came in for special punishment as investors feared these export-oriented economies would be caught in the middle of any escalating trade conflict.
A JPMorgan emerging market currency index <.MIEM00000CUS> fell to its lowest since May 2017. The Turkish lira <TRY=D3> and the Mexican peso <MXN=D3> slipped against the dollar.
Meanwhile, Argentina's peso currency <ARS=> was down about 3 percent against the greenback on doubts that President Mauricio Macri's centre-right government would be able to meet ambitious new fiscal targets.
The U.S. dollar gained about 3 percent against the South African rand <ZAR=D3> as the economy slipped into a technical recession in the second quarter and missed economists' expectations.
Major currencies were also caught in the widening sell-off in emerging markets, with the euro <EUR=EBS> down 0.41 percent.
The pound recouped some losses to trade down about 0.1 percent against the dollar after Bank of England Governor Mark Carney said he was ready to stay in his job beyond his planned leaving date.
Sterling's recovery was further aided by a Reuters news report the European Union could offer new guarantees to Britain to win London's support for a solution aimed at avoiding an Irish border after Brexit.
(Reporting by Saqib Iqbal Ahmed; Editing by Susan Thomas and Chizu Nomiyama)
