* Mnuchin tells FT he sees USD strength in long term as positive
* Treasury yields rebound from 5-mth lows to also lift dollar
* USD/JPY gains limited by caution before US-Japan economic talks
By Shinichi Saoshiro
TOKYO, April 18 (Reuters) - The dollar pulled away from five-month lows versus the yen early on Tuesday, with comments from U.S. Treasury Secretary Steven Mnuchin and higher debt yields giving the bruised greenback some breathing space.
Mnuchin told the Financial Times that he agreed with U.S. President Donald Trump’s view that the dollar’s strength in the short term was hurting exports, but that he also saw the currency’s strength over the long term as a positive.
Mnuchin’s comments were seen to have played down views expressed by the president, who noted last week that the dollar was too strong, sending it reeling.
The dollar added to overnight gains and was up 0.3 percent at 109.190 yen. It had sunk to a five-month trough of 108.130 earlier on Monday on investor wariness towards tensions in the Korean Peninsula.
Still, the dollar was not expected to go much further as the United States begins a first economic dialogue with Japan later on Tuesday.
Concerns are that the United States could take a tough trade stance against Japan, which has been wary of Trump’s complaints that it and other countries have artificially weakened their currencies.
“For dollar/yen, the main focus will be on what kind of pressure the United States could apply on Japan as basically U.S. trade policy is linked with a policy for a weaker dollar,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.
“The yen cannot simply continue weakening along with higher stocks under such conditions,” he said.
Ishikawa said tensions over North Korea “still linger and there is also the upcoming French elections. Faced with such risks, dollar/yen looks to be firmly capped.”
The dollar index against a basket of major currencies was up 0.1 percent at 100.360.
The euro was steady at $1.0643, having seen limited movement on Monday, when many European markets were shut for the Easter holiday.
The Australian dollar stood little changed at $0.7591 . The Aussie nudged up above $0.7600 the previous day on upbeat Chinese growth data. However, weaker prices of iron ore, Australia’s key export, have prevented the currency from staying above that threshold.
Treasury yields rose from five-month lows on Monday as stocks gained, reducing demand for safe-haven debt. (Editing by Richard Borsuk)