June 21, 2019 / 3:00 PM / a year ago

FOREX-U.S.-Iran tensions lifts yen to five-month peak, dollar dips

    * Yen hits five-month high as Iran-U.S. tensions flare
    * Dollar touches 2-week lows on bets on U.S. rate cuts
    * Euro supported by better-than-expected business surveys
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, June 21 (Reuters) - The yen rose to a five-month
high versus the dollar on Friday on growing tensions between
Iran and the United States, while the dollar slipped to a
two-week low against a basket of currencies on bets the Federal
Reserve would start lower interest rates.
    The euro hit a 1-1/2 week peak versus the
greenback after French and German business activity strengthened
more than expected in June, according to surveys.

    Iran's downing of an unmanned U.S. surveillance drone stoked
fears about a military conflict between the two nations
following a spate of attacks on oil tankers in the Gulf region.
    An initial wave of safe-haven buying of the yen faded in the
wake of news that U.S. President Donald Trump shelved a missile
strike against Iran and preferred a dialogue with Tehran
especially over its nuclear program.
    "The Iranians for their part refused the overture for now,
so tensions remain high, but the risk of conflict appears to
have eased," said Boris Schlossberg, managing director of FX
strategy at BK Asset Management in New York.
    The yen moved to 107.045 per dollar during Asian
trading, which was its strongest level since Jan. 3. It was last
down 0.34% at 107.68 per dollar.
    The dollar reversed some of its losses from the prior two
sessions after the Federal Reserve on Wednesday signaled it was
prepared to lower interest rates later this year.
    The Fed and the European Central Bank this week hinted they
were open to ease policies to counter a global economic
slowdown, exacerbated by global trade tensions. 
    The focus now shifts to whether the United States and China
can resolve their trade row at a summit in Japan next week of
leaders from the Group of 20 leading world economies. 
    Trump and Chinese President Xi Jinping are due to meet at
the G20 next weekend, but analysts say chances of a decisive
breakthrough are low.
    The greenback was 0.27% lower at $1.1323 per euro after
touching $1.1334, the lowest since June 12.
    Against a basket of currencies, the dollar was 0.04%
    The dollar got a lift on news of stronger-than-forecast
sales in U.S. existing homes in May.
    The encouraging news offset IHS Markit data that showed a
manufacturing growth weakened to its most sluggish level since
September 2009 in June, while services sector activity slumped
to its lowest level since February 2016.
    Friday's U.S. data did not change traders expectations the
Fed would lower key lending rates, as early as July. They priced
in the probability policy-makers may reduce borrowing rates by
at least 75 basis points at year-end, based on calculations by
CME Group's FedWatch tool on its interest rates futures.
    Currency bid prices at 10:42AM (1442 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1324        $1.1291     +0.29%         -1.26%      +1.1334     +1.1283
 Dollar/Yen       JPY=        107.6200       107.2900    +0.31%         -2.39%      +107.6900   +107.0600
 Euro/Yen         EURJPY=     121.89         121.15      +0.61%         -3.43%      +121.9100   +120.9600
 Dollar/Swiss     CHF=        0.9816         0.9818      -0.02%         +0.02%      +0.9838     +0.9805
 Sterling/Dollar  GBP=        1.2667         1.2699      -0.25%         -0.71%      +1.2724     +1.2644
 Dollar/Canadian  CAD=        1.3216         1.3189      +0.20%         -3.09%      +1.3221     +1.3162
 Australian/Doll  AUD=        0.6914         0.6922      -0.12%         -1.92%      +0.6938     +0.6904
 Euro/Swiss       EURCHF=     1.1120         1.1084      +0.32%         -1.21%      +1.1126     +1.1076
 Euro/Sterling    EURGBP=     0.8938         0.8889      +0.55%         -0.51%      +0.8945     +0.8884
 NZ               NZD=        0.6564         0.6585      -0.32%         -2.26%      +0.6604     +0.6555
 Dollar/Norway    NOK=        8.5485         8.5537      -0.06%         -1.04%      +8.5777     +8.5364
 Euro/Norway      EURNOK=     9.6818         9.6607      +0.22%         -2.26%      +9.6929     +9.6521
 Dollar/Sweden    SEK=        9.3892         9.4147      +0.08%         +4.75%      +9.4267     +9.3809
 Euro/Sweden      EURSEK=     10.6330        10.6250     +0.08%         +3.60%      +10.6420    +10.6120

 (Additional reporting by Tommy Wilkes in London 
Editing by Gareth Jones and Alistair Bell)
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