* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Oct 1 (Reuters) - The dollar rose to a 29-month high on Tuesday as renewed evidence of strength in the U.S. economy encouraged investors to buy dollars, especially versus the euro.
The dollar had already scored its biggest quarterly gain since June 2018, and encouraging economic data from the U.S. have led markets to scale back expectations the Federal Reserve will cut interest rates in coming months.
Germany’s September CPI data, by contrast, rose less than expected, suggesting euro zone inflation was losing momentum and the region’s economy was not improving, despite a large dose of stimulus from the European Central Bank last month.
“The economic divergence trade between Europe and the U.S. has become even stronger, and unless there is a clear sign of a slowdown in the U.S. economy, the dollar is expected to stay on a strong footing,” said Commerzbank analyst Thu Lan Nguyen.
Data due on Tuesday are forecast to show consumer prices in the euro zone rose an annual 1.0% in September, unchanged from the previous month and below the ECB’s target.
Against a basket of other currencies, the dollar rose 0.2% to 99.58, its highest since May 2017.
Economic surprise indexes published by Citigroup for the United States and Europe showed an increased divergence. The former is at its highest in nearly two years; the latter has fallen to a 2019 low.
Elsewhere, the Australian dollar was the main underperformer in the G10m after the Reserve Bank of Australia cut interest rates and expressed concern about job growth.
The Australian dollar fell 0.7% to $0.6700 after the RBA cut its cash rate to a record low of 0.75%, as expected.
The New Zealand dollar fell to a four-year low of $0.6238 , as weakening business confidence bolstered expectations for monetary easing.
Reporting by Saikat Chatterjee