May 22, 2019 / 7:59 AM / a year ago

RPT-FOREX-Yen, franc firm as trade tensions fester; pound sinks

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* Graphic: World FX rates in 2019

By Saikat Chatterjee

LONDON, May 22 (Reuters) - The Japanese yen and the Swiss franc firmed on Wednesday as risk appetite remained weak in the backdrop of festering trade tensions between the United States and China.

While risky assets heaved a sigh of relief overnight after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies, the lack of a significant breakthrough has kept investors on edge.

"We are still skeptical over a long-lasting recovery," said Charalambos Pissouros, a senior markets analyst at JFD group.

"Before we get confident on that front, we would like to see concrete signs that both the US and China are truly willing find common ground."

Against a basket of key rival currencies, the dollar was largely steady at 98.031, having brushed a 3-1/2-week high of 98.134 overnight. The index has risen 1.9% this year.

The Japanese yen and the Swiss franc remained firm against the dollar with both currencies set to gain nearly one percent so far this month against the greenback signaling investors were broadly dialing back on risky assets.

However, MUFG Bank's chief currency strategist Minori Uchida said he expected demand for the U.S. currency to remain strong on a need for dollar funding among emerging markets and on investor cautiousness due to the Sino-U.S. trade dispute.

"Even if yields fall, that's not likely to put a big dent in the dollar's rise," he said.

Sterling was the only notable loser in the early European session with the British currency falling 0.3% to a fresh four-month low against the dollar at $1.2663.

Political uncertainty in Britain deepened as Prime Minister Theresa May's final attempt to seal a Brexit deal failed to win over either opposition lawmakers or many in her own party.

Elsewhere in the foreign exchange market, the euro was steady at $1.1162 before a speech by European Central Bank chief Mario Draghi in Frankfurt. (Reporting by Saikat Chatterjee; Additional reporting by Daniel Leussink in TOKYO; Editing by Toby Chopra)

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