Euro below $1.10 as German survey fails to dispel slowdown fears

• The downbeat survey results come less than two weeks after the ECB pledged indefinite stimulus to revive the 19-country currency bloc's ailing economy.
• The dollar rose slightly against the yen to 107.69 and inched higher against a basket of currencies to 98.664.
• The underperformance of the European economy relative to its US counterpart, according to the Citigroup' economic surprise index, increased.

LONDON: The euro held below $1.10 on Tuesday as positive German business morale survey data calmed sentiment, with large short bets against the single currency also keeping investors sidelined.

German business morale rose in September for the first time in six months but Europe's largest economy is still likely slipping into recession as the US-China trade conflict and Brexit bite, the Ifo economic institute said.

"The data was quite negative but I think the euro has stabilised for now and we see it heading up to $1.12 versus the dollar in the coming months," said Manuel Oliveri, an FX strategist at Credit Agricole in London.

Against the dollar, the single currency was broadly steady at $1.0989 and not far from a September low of $1.0926 hit on Sept. 3.

On Monday, IHS Markit's Euro Zone Composite Flash Purchasing Managers' Index (PMI) sank to 50.4 in September from 51.9 in August and was below all forecasts in a Reuters poll that had predicted a reading of 51.9.

The downbeat survey results come less than two weeks after the ECB pledged indefinite stimulus to revive the 19-country currency bloc's ailing economy.

"The hope of a stabilisation has been squashed for now and as a result fears of a recession are rising," Ulrich Leuchtmann, head of FX and commodity research at Commerzbank AG, said.

Fears of an economic slowdown have prompted hedge funds to ramp up their negative bets against the euro in recent weeks with overall short bets at their largest in three months, according to futures data.

Though employment data in the US services sector also painted a slowing picture of the world's biggest economy, the underperformance of the European economy relative to its US counterpart, according to the Citigroup' economic surprise index, increased.

The dollar rose slightly against the yen to 107.69 and inched higher against a basket of currencies to 98.664.

Sterling was trading broadly flat on the day after surging  briefly to a session high of $1.2491 immediately after the Supreme Court ruled Prime Minister Boris Johnson's decision to suspend parliament for five weeks was unlawful. It was last at $1.2462.