* Dollar off two-year high after weak capital goods, PMIdata
* Euro bolstered by defeat of euroskeptics in Dutch vote
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Recasts; updates prices; changed dateline, LONDON previous)
NEW YORK, May 24 (Reuters) - The dollar fell on Friday froma two-year high after orders for U.S.-made capital goods fell,further evidence that manufacturing and the broader economy areslowing, due in part to the trade conflict with China.
The weaker-than-expected data, a closely watched proxy forbusiness spending plans, added to the dollar's fall, which beganThursday following a report that showed manufacturing activityhit its lowest level in almost a decade in May. Together, thereports suggested a sharp slowdown in U.S. economic growth wasunder way, which could affect the dollar's safe-haven status. urn:newsml:reuters.com:*:nLNSOGEF4Aurn:newsml:reuters.com:*:nL2N22Y1EO
Against a basket of six major currencies, the dollar .DXY was down 0.16% at 97.698 and 0.69% off a two-year high of 98.371hit the previous session.
"Lot of people for good reasons thought trade wars may beU.S. dollar-positive and other countries cannot retaliate," saidCommerzbank FX strategist Ulrich Leuchtmann.
"But in reality, it's more difficult. This verydisappointing PMI data and other factors like the Huawei storyare all creating stress for the U.S. economy and derailingsentiment."
China on Friday denounced U.S. Secretary of State MikePompeo for fabricating rumors after he said the chief executiveof China'sHuawei Technologies Co LtdHWT.UL was lying abouthis company's ties to the Beijing government. urn:newsml:reuters.com:*:nL4N2301MB
Escalating trade tensions and weak data have fuelled ratecut expectations by the Fed. Money markets broadly expect onerate cut by October followed by another by January 2020.
Dollar weakness also helped boost sterling from a 4-1/2month low GBP= , though the rally was primarily driven by UKPrime Minister Theresa May's announcement on Friday that shewould quit, setting up a contest that will bring a new primeminister to power who could pursue a cleaner break with theEuropean Union. It was last up 0.14% at $1.267. urn:newsml:reuters.com:*:nL5N2300L0
The euro was also stronger on Friday, up 0.18% to $1.20benefiting from the dollar's weakness, and from the Dutch partof the EU parliamentary elections. An exit poll showed theLabour party of European Commissioner Frans Timmermans won asurprise victory over a euroskeptic challenger who had beentopping opinion surveys. urn:newsml:reuters.com:*:nL5N22Z6F4
The single currency is down 2.3% this year, which ledanalysts at Bank of America to change their forecast of theeuro's price at the end of 2019 from $1.20 to $1.17. (Reporting by Kate Duguid and Abhinav RamnarayanEditing by Nick Zieminski) ((firstname.lastname@example.org; +646-223-6118; ReutersMessaging: email@example.com@thomsonreuters.net))