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FOREX-Unease over Trump sends dollar to 1-1/2 month low

* Dollar falls 1 pct vs yen, index hits 1-1/2 month low

* Caution after Trump’s first weekend as president

* Sterling rises 0.8 percent ahead of Supreme Court decision

* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Jan 23 (Reuters) - The dollar fell to a 1-1/2 month low on Monday against an index of the world’s other top currencies, after U.S. President Donald Trump struck a protectionist tone in his inauguration speech.

Trump’s “America first” message was followed over the weekend by coordinated protests in U.S. cities, testy exchanges between members of his top staff and media and confirmation that key trade pacts were heading for the shredder.

The dollar index, which measures the greenback against six major rivals, fell almost half a percent to 100.28 led by a 1 percent drop to 113.51 yen and a 0.35 percent slide to $1.0750 per euro.

“People had expected some kind of repeat of his (Trump’s) victory speech in November, but it was a bit confrontational and has sparked some concerns in the markets that he is going to play hard ball,” said Rabobank strategist Philip Marey.

“It was quite straight forward: buy American, hire American... so it’s clear what route he is taking.”

Trump confirmed that he would begin renegotiating the North American Free Trade Agreement and withdraw from the Trans-Pacific Partnership (TPP), the main economic pillar of the Obama administration’s “pivot” to the Asia-Pacific region in the face of a fast-rising China.

That, and the declaration of a “running war” with parts of the media, all fed uncertainty about the direction policy will take and pointed to a bumpy few months ahead as the president settles into day-to-day office.

The dollar index rose around 4.2 percent between Trump’s election in November and the end of last year, but it has given back over 2.5 percent of that gain since then, having fallen for nine of the 16 trading sessions this year.

Against the yen the fall so far in January has been 3 percent, though trader postioning data on Friday showed large short positions against the yen remain.

SUPREME COURT

Sterling was the other big gainer among developed-market currencies, hitting a five-week high as investors bet Britain’s Supreme Court would on Tuesday rule that the government needs parliamentary approval to trigger formal Brexit talks.

It climbed as much as 0.8 percent to $1.2472, its strongest level against the dollar since Dec. 19, and had pushed its way towards a two-week high against the euro at 86.20 pence per euro.

The euro was also back up above $1.0740 against the dollar though, as a 0.4 percent rise set it on course for its seventh daily rise in the last nine.

A vote in France at the weekend meant former Socialist government rebel Benoit Hamon will go up against ex-prime minister Manuel Valls to be the presidential candidate of the country’s beleaguered left.

It was another result that upset the pre-vote polls and analysts said it could boost the hopes of centrist Emmanuel Macron, who some surveys suggest may do better against nationalist Marine Le Pen.

“Our main conclusion for the presidential election is that the result seems to increase the chances of Emmanuel Macron, who is running as an independent, to qualify for the second round on 23 April,” said Barclay’s head of European Research Philippe Gudin.

Euro volatility forwards for the next three months , which give traders the option to position for swings in the currency, were near their lowest since mid-November on Monday.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Marc Jones; editing by John Stonestreet)

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