FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

By Gregor Stuart Hunter

SINGAPORE, Dec 2 (Reuters) - The U.S. dollar remained under pressure on Tuesday as weaker-than-expected manufacturing activity data from the world's biggest economy heaped pressure on the Federal Reserve to cut interest rates at its policy meeting later this month. The U.S. dollar index, which measures the greenback's strength against a basket of six major peers, edged lower to 99.408 at the start of the Asian trading session after falling for a seventh consecutive session to hit a two-week low during U.S. trading hours on Monday as stocks and bonds pulled back. Data released on Monday showed U.S. manufacturing contracted for the ninth straight month in November, as the Institute for Supply Management's manufacturing PMI dropped to 48.2 in November from 48.7 a month earlier.

Gauges of new orders and employment also deteriorated, while input prices rose as the drag from import tariffs persisted. "It all suggests to me that demand in the economy has decelerated," said Brian Martin, head of G3 economics at ANZ in London. "I really do think the Fed needs to cut interest rates, and not just cut rates in December, but follow through with further cuts next year," he said on a podcast, adding he forecasts an additional 50 basis points of cuts in 2026. Fed funds futures are pricing in an implied 88% probability of a 25-basis-point cut at the U.S. central bank's next meeting on December 10, compared to a 63% chance a month ago, according to the CME Group's FedWatch tool. The yield on the U.S. 10-year Treasury bond was last up at 4.086% after a selloff in global bond markets on Monday. Against the yen, the dollar traded at 155.51 yen, unchanged from late U.S. levels, after Bank of Japan Governor Kazuo Ueda said on Monday that the central bank would consider the "pros and cons" of raising interest rates at its next policy meeting, sending Japanese two-year yields above 1% for the first time since 2008. The euro stood at $1.1610, holding steady so far in Asia, as talks to end the war in Ukraine continued, with European leaders rallying around Ukrainian President Volodymyr Zelenskiy after an earlier U.S.-backed peace proposal that favoured Russia, while the U.S. special envoy headed to Moscow for more talks with the Kremlin. Sterling traded at $1.3216, near its highest levels in a month but little changed so far on the day. The head of Britain's fiscal watchdog resigned on Monday after the agency inadvertently released key details of the government's annual tax and spending budget last week before finance minister Rachel Reeves announced them in parliament. The Australian dollar fetched $0.6544, while the kiwi dollar traded at $0.5727, both little changed at the start of the Asian trading session.

(Reporting by Gregor Stuart Hunter; Editing by Muralikumar Anantharaman)