(Recasts, new throughout, adds analyst quotes)
By Kate Duguid
NEW YORK, Aug 12 (Reuters) - The U.S. dollar index wasroughly flat on Monday and sterling and the euro saw a modestrise as the foreign exchange market fell into an August lull, atraditionally quiet trading period with many investors andtraders on vacation.
"It has been a pretty quiet day overall. We have hadsterling and euro bubbling up. I don't think there's anyparticular super-positive news behind that. But, markets heldsubstantial shorts in both currencies," said Gregory Anderson,global head of foreign exchange strategy at BMO Capital Marketsin New York.
The currency market is "heading into the deepest part of theholiday period. People are taking the shorts off and it putsupward pressure on both currencies. It's probably the biggeststory in FX for today."
The dollar index .DXY was 0.1% lower at 97.390, havingfallen earlier on expectations that a prolonged U.S.-China tradewar would have a negative impact on American economic growth.
The Japanese yen JPY= rose to its highest against thedollar since March 2018 - barring a flash crash in January thisyear - as investors ramped up bets that the safe-haven currencycould gain more if the trade conflict is prolonged. It was last0.38% stronger against the dollar at 105.26.
"The stronger yen was at or near 2019 highs against its U.S.counterpart on prospects of a long drawn-out U.S.-China tradewar. The longer the trade war drags on, the more likely it wouldweigh (on) the global outlook and crimp the world economy, anegative for market morale," said Joe Manimbo, senior marketanalyst at Western Union Business Solutions.
Goldman Sachs analysts on Sunday said they no longerexpected Washington and Beijing to come to a trade agreementbefore the 2020 presidential election. They lowered theirforecast for fourth-quarter U.S. growth and said the chances aprotracted trade war would lead to recession were rising. urn:newsml:reuters.com:*:nL4N257086
This week, market attention will be on Chinese retail salesand industrial output for July, due out on Wednesday, to gaugethe trade war's impact on domestic activity.
Investors will also be focused on the U.S. Federal Reserve'sannual symposium at Jackson Hole, Wyoming, later this month,seeking greater clarity on the future path of interest rates.Markets are expecting two to three additional rate cuts from theFed by the end of the year. (Reporting by Kate Duguid and Saikat ChatterjeeEditing by Paul Simao, Steve Orlofsky and Jonathan Oatis) ((email@example.com; +646-223-6118; ReutersMessaging: firstname.lastname@example.org@thomsonreuters.net))