FOREX-Dollar steady after coming off 2-yr high, pressured by lower U.S. yields

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

By Daniel Leussink

TOKYO, May 24 (Reuters) - The dollar held steady on Friday,having come off two-year highs on lower U.S. yields in theprevious session amid fears that a trade war with China willhurt the U.S. economy more than previously thought.

Against a basket of key rival currencies, the dollar waslargely unchanged at 97.906 .DXY , having fallen from atwo-year high of 98.371 overnight. The index is still up 1.8%for the year.

"Global risk aversion stemming from the intensifyingU.S.-China trade tension is causing the stronger yen," saidMasafumi Yamamoto, chief currency strategist at MizuhoSecurities.

"Markets are pricing in the potential negative impact on theU.S. economy and the U.S. equity markets," he said, referring toU.S.-China trade tensions.

On Thursday, President Donald Trump said U.S. complaintsagainst Huawei Technologies Co LtdHWL.UL might be resolvedwithin the framework of a U.S.-China trade deal, while at thesame time calling the Chinese telecommunications giant "verydangerous." urn:newsml:reuters.com:*:nL4N22Z35N

The benchmark 10-year U.S. Treasury note yield US10YT=RR was last up slightly at 2.3309%.

Overnight, it fell to its lowest since October 2017 after anearly read on U.S. manufacturing activity for May posted itsweakest pace of growth in almost a decade, suggesting a sharpslowdown in economic growth was underway. urn:newsml:reuters.com:*:nL2N22Y1EO

There was only a 38.2% expectation on Thursday that U.S.interest rates will be at current levels in October of thisyear, compared to 58.3% a month ago, according to the CMEGroup's FedWatch tool.

Against the yen, the dollar edged up to 109.695 yen, havinggiving up two-thirds of a percent overnight to record itssteepest drop in a single session in two months.

The greenback is still 0.6% above a three-month trough of109.02 yen touched on May 13.

The Australian dollar held steady at $0.6904AUD=D4 ,putting it on track to finish the week with a 0.5% gain, itsfirst positive weekly performance in six weeks.

Elsewhere in the foreign exchange market, the euro was flatat $1.1183EUR= , having bounced from a two-year low of$1.11055 during the previous session.

The single currency came under pressure after a privatesurvey showed activity in Germany's services and manufacturingsectors fell in May, aggravating fears about the effect ofunresolved trade disputes on Europe's largesteconomy. urn:newsml:reuters.com:*:nL9N1VQ01H

Compounding these worries, European parliamentary electionsbegan on Thursday with eurosceptic parties expected to do well,raising concerns about the single currency's stability. (Reporting by Daniel Leussink; editing by Darren Schuettler) ((daniel.leussink@thomsonreuters.com; Twitter: @danielleussink;+81-3-6441-1825; Reuters Messaging:daniel.leussink.thomsonreuters.com@reuters.net))

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

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