FOREX-Dollar holds advantage for now, traders still wary about global growth risks

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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Dollar recovers composure after positive economic data

* Sentiment still fragile after yield curve inversion

By Stanley White

TOKYO, Aug 16 (Reuters) - The dollar held onto gains onFriday after a surge in U.S. retail sales eased concerns aboutthe world's top economy, but traders cautioned against readingtoo much into one piece of data given the growing risks to theoutlook.

The greenback was on course for a weekly gain againstsafe-haven currencies such as the Japanese yen and the Swissfranc, pointing to some respite for frayed nerves after fears ofrecession and protests in Hong Kong rattled financial markets.

During Asian trading the dollar briefly extended gains andthe yen fell as Japanese stocks erased early losses to tradehigher and as U.S. Treasury yields rose slightly. The movequickly faded, however, partly reflecting thin treading due tothe summer holiday season.

Against a basket of six major currencies, the dollar index .DXY edged higher to 98.218. Since hitting a three-week low onAug. 9, the dollar index has recovered, rising around 1%.

Data showing American consumers continued to splurge in Julycame as a relief to investors after the U.S. bond market soundedalarms of a recession. urn:newsml:reuters.com:*:nL2N25A16D

Yet, the fragile calm in markets is unlikely to last,traders said.

This week's inversion in the U.S. Treasury yield curve,which has historically preceded several past U.S. recessions,has stoked fresh worries about the economic impact of theSino-U.S. trade war.

China on Thursday vowed to counter the latest U.S. tariffson $300 billion of Chinese goods, but U.S. President DonaldTrump said any pact would have to be on America's terms,suggesting a resolution to the trade war remains elusive. urn:newsml:reuters.com:*:nL4N25B2NR

Trump, who is seeking re-election in 2020 and had made theeconomy and his tough stance on China a key part of his 2016campaign for the White House, said any agreement must meet U.S.demands.

More protests are also expected in Hong Kong over theweekend, which could become a new geopolitical flashpoint andfurther complicate the U.S.-China trade war.

Ten weeks of clashes between police and pro-democracyprotesters, angered by a perceived erosion of freedoms, haveplunged the Asian financial hub into its worst crisis since itcame under Chinese rule from Britain in 1997. urn:newsml:reuters.com:*:nL2N25B17Z

"The most important point is there are more signs of aglobal economic slowdown," said Tsutomu Soma, general manager offixed income business solutions at SBI Securities in Tokyo.

"Rates will continue to fall, and investors will pull backfrom risk, which means money will leave emerging markets and goto Treasuries, the Swiss franc, gold, and the yen."

The dollar was little changed at 106.18 yenJPY=EBS inAsian trading after rising 0.2% on Thursday.

For the week, the greenback was up 0.5% against the Japanesecurrency, its biggest gain since the week ended July 26.

The dollar rose 0.3% to 0.9787 Swiss franc, CHF=EBS , oncourse for a 0.6% weekly gain.

A day after inverting, the U.S. yield curve steepened alittle. Curve inversion, which occurs when long-term yields dipbelow short-term yields. US2US10=TWEB

Sterling GBP=D3 was marginally higher, on course for itsfirst weekly gain since mid-July, as positive data on retailsales and consumer pries showed the British economy is in bettershape than some investors had feared.

The pound traded at $1.2088, close to a one-week high of$1.2150.

However, sterling bears are still on the ascendancy giventhe risk that Prime Minister Boris Johnson will take Britain outof the European Union without transitional trade agreements,potentially causing short-term economic turmoil. (Reporting by Stanley WhiteEditing by Shri Navaratnam) ((stanley.white@thomsonreuters.com; +81 3 6441 1984twitter.com/stanleywhite1;))

This article appears in: Politics , Stocks , World Markets
Referenced Symbols: EUR

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