By Saqib Iqbal Ahmed
NEW YORK (Reuters) - The dollar rose against a basket of other major currencies on Tuesday, a day after the International Monetary Fund trimmed its global growth forecasts, and as worries about U.S.-Chinese trade tensions drove investors to shun riskier currencies.
The dollar index (DXY), which tracks the greenback versus the euro, yen, sterling and three other currencies, was up 0.07 percent at 96.399, after earlier reaching 96.484, the highest since Jan. 4.
The IMF on Monday cut its world economic growth forecasts for 2019 and 2020 because of weakness in Europe and some emerging markets, and said failure to resolve trade disputes could further destabilize a slowing global economy.
Pessimism about global growth drove down commodity markets and shares worldwide on Tuesday.
"It's a risk-off kind of undertone to the market that is the main driving force here," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
Lack of signs of progress in trade talks between the United States and China, the IMF downgrade and growing worries over the impact of an extended U.S. government shutdown weighed on risk appetite on Tuesday, said Osborne.
China's economy cooled in the fourth quarter under pressure from faltering domestic demand and bruising U.S. tariffs, dragging 2018 growth to the lowest level in nearly three decades. Growing signs of weakness in China are fuelling anxiety about risks to the world economy.
The dollar was 0.24 percent lower against the yen
The Bank of Japan is expected to leave policy unchanged at its Jan. 22-23 meeting. Analysts expect monetary policy to remain accommodative in Japan this year.
In another sign of risk aversion, the Australian dollar AUD=D3, often used as a liquid proxy for China investments, eased 0.39 percent to $0.713.
The euro struggled near a three-week low as morale among German investors improved slightly in January, but their assessment of the economy's current condition deteriorated to a four-year low, a survey showed on Tuesday, sending mixed signals for the growth outlook of Europe's largest economy.
The single currency was down 0.14 percent at $1.1348, its lowest since Jan. 3.
Sterling rose after strong employment data suggested Britain's labor market remained robust despite an economic slowdown ahead of Brexit. The pound was up 0.25 percent at $1.2922.