By Saikat Chatterjee
LONDON (Reuters) - The euro slipped a quarter of a percent on Tuesday as investors warily eyed business activity data that will shed light on whether growing rhetoric over a trade war between the U.S. and its trading partners in recent weeks has dampened sentiment.
European data has stabilized after losing momentum earlier this year, but sentiment remained cautious with French PMI data easing slightly. Eurozone PMI data is due shortly and is also expected to slip.
"Should the PMIs reflect a stronger than expected collapse today the trade conflict might increasingly become an issue for the euro as well," Commerzbank (DE:CBKG) strategists said.
In early London trading, the single currency was down 0.3 percent at $1.1654. It hit a near two-week high in the previous session at $1.1750.
The Japanese yen trimmed most of its gains against its rivals on Monday as traders dampened expectations about whether the Bank of Japan will launch a fresh round of stimulus at a scheduled policy meeting next week.
Japan's central bank is debating changes to its interest-rate targets and stock-buying techniques, people familiar with the central bank's thinking told Reuters, sending bond yields and the yen rocketing higher on Monday.
The yen
Risk appetite was mostly firm across markets after Beijing vowed to pursue a more 'vigorous' fiscal policy, stepping up efforts to support growth amid rising economic headwinds.
Both the euro and sterling edged higher against the Swiss franc as investors bet that a fresh round of policy easing from China would send investors into higher-yielding assets.
However, expectations of further loosening in monetary conditions drove the offshore yuan down half a percent to a 13-month low of 6.8448 yuan per dollar, its lowest since June 2017.