* Yen benefits as risk sentiment suffers
* Commodity-linked currencies slip as oil rally runs out of steam (New throughout, updates rates, comments to U.S. market open; changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, June 25 (Reuters) - The dollar fell against the Japanese yen on Monday, as worries about escalating trade tensions between the United States and other leading economies kept risk appetite in check.
The greenback was down 0.28 percent at 109.65 yen, after slipping to a two-week low of 109.38 earlier in the session.
The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official briefed on the matter said on Sunday.
The news added to the sense of caution felt after U.S. President Donald Trump on Friday threatened to impose a 20 percent tariff on cars imported from the European Union. The EU said it would be forced to retaliate .
“A new week is underway and yet the same concerns remain as Donald Trump ramps up trade threats against China and the EU (European Union) which continues to take its toll on risk appetite,” Craig Erlam, senior market analyst at OANDA in London, said in a note.
The yen tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.
The dollar index, which measures the greenback against a basket of six major currencies, was down 0.14 percent at 94.389.
China’s yuan on Monday ended the official domestic trading session at its lowest in six months after the central bank cut reserve requirements for some banks to boost lending .
The euro was 0.28 percent higher against the greenback at $1.1688, after hitting a more than one-week high of 1.1701.
The euro’s gains come after it strengthened on Friday following improved regional economic growth data and new assurances by Italian politicians that their nation would not leave the single currency.
Still, the euro remains vulnerable to regional political instability as German Chancellor Angela Merkel faces pressure to deal with the migration dispute that has divided Europe and threatened her own government.
Last week, the euro saw the biggest unwinding of long positions by hedge funds in the currency’s 19-year history. Speculators turned bullish on the dollar for the first time since July last year, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.
“It’s (the dollar) going to trade firm based on the fact that U.S. interest rate differentials continue to widen versus the rest of the world,” said Brad Bechtel, managing director at Jefferies in New York.
“With the Fed hiking, the U.S. economy doing well and inflation perky, it’s really hard to be short dollars,” said Bechtel.
The commodity-linked Aussie, kiwi and loonie were weak as a surge in crude oil prices ran out of steam.
Reporting by Saqib Iqbal Ahmed Editing by Frances Kerry