June 18, 2018 / 6:41 PM / 10 months ago

FOREX-Trade worries stoke safety demand for yen, Swiss franc

    * Euro under pressure as ECB seen holding rates into H2 2019
    * Dollar steadies on trade tension, further U.S. rate hikes
    * China yuan falls to five-month lows in offshore market

 (Updates market action, adds graphic)
    By Richard Leong
    NEW YORK, June 18 (Reuters) - Anxiety about a global trade war spurred demand on Monday for the
Japanese yen and Swiss franc, while the euro 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.
    In a quiet trading session, the dollar was supported by some safe-haven demand and signals from the
Federal Reserve that it would increase overnight borrowing costs due to a tightening labor market and
rising inflation.
    The ongoing trade dispute between the United States and China knocked the yuan to 6.4600 per
dollar, its weakest in five months in the offshore market. 
    On Friday, the White House enacted tariffs on $50 billion in Chinese goods. Beijing quickly responded
with a 25 percent levy on 659 U.S. products, worth $34 billion, ranging from soybeans and autos to
    "It's tough to say whether it will spiral further because it's so fluid. It does weigh on sentiment at
times," said Eric Viloria, currency strategist at Wells Fargo Securities in New York. "Our base case is
that there won't be a trade war."
    The yen was up nearly 0.2 percent against the dollar at 110.48 yen and about 0.1 percent higher
versus the euro at 128.32 yen in early U.S. trading.
    The Swiss franc notched a 0.3 percent increase against the greenback at 0.9943 franc and a 0.2
percent gain versus the euro at 1.1550 franc .
    The dollar was steady against the euro at $1.1615 after the Fed flagged more rate hikes are
coming and the ECB signaled it will likely keep rates near a record low into the summer of 2019.

    The greenback is "in a consolidation phase in the near term," Viloria said. "People are looking for
economic data that show more improvement outside the U.S."
    The euro has stabilized after on Thursday suffering its biggest one-day drop against the dollar since
Britain voted to leave the European Union two years ago. 
    ECB governing council member Vitas Vasiliauskas said on Monday the central bank may decide on a rate
increase toward the autumn of next year.   
    Tensions with the governing coalition in Germany also weighed on the single currency. Chancellor
Angela Merkel's Bavarian allies may defy her by implementing a plan to limit immigration at the German
border and risk destabilizing her three-month-old coalition.
    Speculators further pared their net longs in the euro last week, retreating from a record high reached
on April 20,  according to calculations by Reuters and Commodity Futures Trading Commission data released
on Friday.
    Currency bid prices at 2:30 p.m. EDT (1830 GMT):
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1618        $1.1607     +0.09%         -3.15%      +1.1624     +1.1566
 Dollar/Yen       JPY=        110.4900       110.6600    -0.15%         -1.93%      +110.7400   +110.3100
 Euro/Yen         EURJPY=     128.36         128.43      -0.05%         -5.05%      +128.6100   +127.8300
 Dollar/Swiss     CHF=        0.9942         0.9974      -0.32%         +2.04%      +0.9990     +0.9937
 Sterling/Dollar  GBP=        1.3250         1.3283      -0.25%         -1.94%      +1.3285     +1.3227
 Dollar/Canadian  CAD=        1.3210         1.3199      +0.08%         +5.03%      +1.3237     +1.3160
 Australian/Doll  AUD=        0.7420         0.7440      -0.27%         -4.88%      +0.7456     +0.7414
 Euro/Swiss       EURCHF=     1.1553         1.1576      -0.20%         -1.16%      +1.1574     +1.1534
 Euro/Sterling    EURGBP=     0.8765         0.8736      +0.33%         -1.33%      +0.8779     +0.8729
 NZ Dollar/Dolar  NZD=        0.6937         0.6948      -0.16%         -2.10%      +0.6956     +0.6921
 Dollar/Norway    NOK=        8.1261         8.1466      -0.25%         -0.99%      +8.1799     +8.1216
 Euro/Norway      EURNOK=     9.4417         9.4588      -0.18%         -4.13%      +9.4702     +9.4337
 Dollar/Sweden    SEK=        8.8155         8.7824      +0.39%         +7.48%      +8.8698     +8.7863
 Euro/Sweden      EURSEK=     10.2398        10.1997     +0.39%         +4.07%      +10.2788    +10.2000

 (Additional reporting by Tommy Wilkes, Saikat Chatterjee in LONDON
Editing by Dan Grebler and Tom Brown)
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