* Dollar at lowest in over 2 months against a basket of currencies
* U.S. manufacturing data shows modest rebound
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Hideyuki Sano
TOKYO, June 2 (Reuters) – The dollar was on the defensive on Tuesday as investors stuck to hopes of a global economic recovery despite heightened concerns over U.S.-China tensions and mass protests in many U.S. cities over the death of a black man in police custody.
The U.S. dollar’s index against a basket of six major currencies stood at its weakest level since mid-March, at 97.790.
The euro fetched $1.11295, little changed so far on Tuesday but holding near a 2-1/2-month high of $1.1154 touched on Monday.
Sterling traded at $1.2491, having hit a one-month high of $1.2506.
U.S. manufacturing activity eased off an 11-year low in May and although the reading was weaker than forecast, it fit into markets’ expectations that the worst of the economic downturn was behind as businesses reopen.
“There are some potential flash points such as U.S. demonstrations and China-U.S. tensions. But, on the whole, the market is still moderately risk-on,” said Kyosuke Suzuki, director of forex at Societe Generale.
Against the safe-haven yen, the dollar was at 107.57 yen , stuck in a well-worn range between 106 and 108 over the last several weeks.
President Donald Trump said on Monday he was deploying thousands of heavily armed soldiers and law enforcement to halt violence in the U.S. capital and vowed to do the same in other cities if mayors and governors fail to regain control of the streets.
The protests erupted over the death of George Floyd, a 46-year-old African-American who died in Minneapolis police custody after being pinned beneath a white officer’s knee for nearly nine minutes.
Market risk sentiment was hurt only slightly on Monday when Bloomberg reported that China had told state-owned firms to halt purchases of soybeans and pork from the United States, raising concerns that the trade deal between the world’s two biggest economies could be in jeopardy.
The Australian dollar, often seen as a proxy bet on the strength of the Chinese economy, fetched $0.6794, having reached its highest levels since late January.
The Reserve Bank of Australia is expected to keep rates on hold when it meets later on Tuesday.
The Chinese yuan stood flat at 7.1230 per dollar in offshore trade, near its highest levels in almost two weeks. (Reporting by Hideyuki Sano Editing by Shri Navaratnam)