June 18, 2018 / 12:53 AM / a month ago

FOREX-Dollar approaches 7-month high, trade tensions limit gains

* Dollar index edges up after digesting flurry of events

* US-China woes curb gains, but overall reaction limited thus far

* US tariffs and China’s response seen in line with expectations

* Dollar’s losses vs safe-haven yen limited

By Shinichi Saoshiro

TOKYO, June 18 (Reuters) - The dollar edged up towards a seven-month high against a basket of its peers on Monday after the market digested a flurry of news, although U.S.-China trade tensions slowed its gains.

The dollar index versus a basket of six major currencies crept up 0.1 percent to 94.882.

The index was in reach of 95.131, a seven-month peak scaled on Friday when it soared more than 1 percent last week after the U.S. Federal Reserve gave a hawkish signal on interest rates while the European Central Bank struck a dovish tone.

In addition to policy meetings at the Fed, the ECB and the Bank of Japan, the currency markets last week faced a U.S.-North Korea summit and renewed trade tensions between the United States and China.

The greenback navigated through those events, last of which was a decision by the United States on Friday to enact tariffs on $50 billion in Chinese goods and Beijing’s vow to respond in kind.

“The reaction by currencies to the trade developments has been mostly limited as the U.S. measure and China’s response were in line with expectations,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“A further escalation of U.S.-China trade tensions is of course a risk scenario. But the current tariffs, even if implemented, will hardly dent the global economy and the market also has to ponder about a scenario in which the two countries try to diffuse tensions.”

The U.S. currency managed to limit is losses against the yen, a rough gauge of broader risk appetite because of the yen’s perceived status as a safe haven in times of market turmoil and political tension.

The dollar was down 0.1 percent at 110.500 yen after brushing a three-week high of 110.905 on Friday.

The euro slipped 0.2 percent to $1.1585, extending losses after sliding 1.3 percent the previous week after the ECB signalled it will keep interest rates at record lows well into next year.

The Australian dollar was 0.15 percent lower at $0.7426 and the New Zealand dollar lost 0.35 percent to $0.6922 . (Reporting by Shinichi Saoshiro Editing by Eric Meijer)

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