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FOREX-Dollar, yuan recoil as U.S.-China trade row intensifies, yen gains

Published 19/06/2018, 03:52 pm
© Reuters.  FOREX-Dollar, yuan recoil as U.S.-China trade row intensifies, yen gains
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(Adds South African rand, updates prices throughout)

* Yen, Swiss franc up after Trump's threat of new tariffs on China

* China yuan falls to five-month lows in offshore market

* Australian, Canadian dollars sink to one-year lows

* Euro under pressure, Sintra forum eyed for more ECB rate clues

By Tomo Uetake

TOKYO, June 19 (Reuters) - The dollar fell against the yen and Swiss franc on Tuesday after U.S. President Donald Trump's threats of additional tariffs on China escalated a trade spat between the world's two largest economies in a worrying sign for global growth prospects.

China's yuan fell to a more than 5-month low to the dollar, despite a firmer official yuan midpoint, as market sentiment soured. CNY/

The Japanese yen JPY= climbed 0.8 percent against the dollar to 109.64 yen, its highest level in a week, after Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods, ratcheting up a trade dispute with Beijing. perceived safe haven during market turmoil, the Swiss franc CHF= , also got a boost from the news. It was up as much as 0.3 percent against the dollar to 0.9915 franc.

China's commerce ministry said Beijing will fight back firmly with "qualitative" and "quantitative" measures if the United States publishes an additional list of tariffs on Chinese goods, accusing Washington of launching a trade war.

The yuan slid to a low of 6.4490 to the dollar at one point, its weakest since Jan. 15. and businesses worry that a full-blown trade battle could derail global growth.

"The latest headlines from Trump are pushing investors to risk-off mode," said Shintaro Ikeshima, chief manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking Corp.

"Although many think this might be another bluff from Trump, markets are likely to stay nervous to trade-related headlines for now."

The Australian dollar AUD= sank to a one-year low of A$ 0.7380 on the escalating U.S.-China trade spat and as base metal prices slid.

The Canadian dollar CAD= weakened to a one-year low of C$ 1.3237 overnight, before paring some of its losses on Tuesday, as investors worried about Canada's trade feud with the United States. China hawks, like (Robert) Lighthizer and (Peter) Navarro, appear to have gained power within the Trump administration lately, an all-out trade war now seems more inevitable," said Yasunari Ueno, chief market analyst at Mizuho Securities.

"As long as the hawks remain in power, this is going to remain as a key source of concern in the medium- to long- term."

Emerging market currencies also came under pressure, with the South African rand ZAR=D3 shedding 1.9 percent to hit its seven-month low of 13.9150.

The euro EUR= bounced back slightly to $1.1623 after hitting a two-week low of $1.1541 Friday.

But the common currency remained under pressure due to a dispute in Germany's governing coalition and expectations the European Central Bank will hold interest rates steady into 2019.

Chancellor Angela Merkel's Bavarian allies may defy her by implementing a plan to limit immigration at the German border and risk destabilising her three-month-old coalition. trade was generally subdued with the focus turning to a three-day ECB forum in Sintra, Portugal, through Wednesday. ECB President Mario Draghi, chief economist Peter Praet and others will speak at the forum later on Tuesday.

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