January 9, 2020 / 5:33 PM / 13 days ago

FOREX-Yen drops to two-week low vs dollar as U.S.-Iran tension fades

    * Japanese yen falls to two week low
    * Dollar index up, investors focus on U.S. non-farm payrolls
    * Chinese yuan rises to five-month high vs dollar
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 9 (Reuters) - The safe-haven yen fell to two-week lows against the dollar on Thursday as
the United States and Iran moved away from an all-out conflict, prompting investors to take on more risky
assets and focus more on an upcoming U.S.-China trade deal.
    U.S. President Donald Trump responded to an Iranian attack on U.S. forces with sanctions, not
violence. Iran offered no immediate signal it would retaliate further against a Jan. 3 U.S. drone strike
that killed its senior military commander.
    The yen, seen as a safe haven in times of geopolitical turmoil because of its deep liquidity and
Japan's current account surplus, reversed the gains it made against the dollar after Iran's missile
strike. The dollar was last up 0.3% at 109.48 yen, after earlier hitting 109.57 yen, its highest
since Dec. 27.
    "Markets are taking comfort from a cooling in U.S.-Iran tensions after conciliatory words from
President Trump," said Joe Manimbo, senior market analyst at Western Union Business Solutions in
Washington. "The Mideast crisis going from a boil to a simmer allowed bullish U.S. fundamentals to return
to the surface."
    Gold prices also slid, retreating further from a near-seven-year peak scaled in the previous session.

    Implied volatility gauges for euro/dollar are falling back toward late 2019 lows, which is "very
telling," according to Reuters analysts. 
    Three-month implied volatility in euro/dollar fell to 4.27% at the end of November, its lowest level
on record.
    Focus is expected to shift back to the global economy, with expectations the United States and China
will sign a trade deal next week providing underlying support for risk assets.
    China's Vice Premier Liu He, head of the country's negotiation team in the Sino-U.S. trade talks will
visit Washington on Jan. 13-15, Gao Feng, spokesman at the commerce ministry said.
    Investors think the deal will clear one of the world economy's biggest uncertainties and help boost
global growth this year, although some think that view is too optimistic.
    Market participants are also looking ahead to Friday's U.S. non-farm payrolls report, with forecasts
of 164,000 new jobs in December, from 266,000 the previous month.
    In other currencies, China's yuan rose to a five-month high of 6.9175 against the dollar overnight in
the offshore market, boosted by a steady inflation readout. 
    In midday trading, the dollar index was 0.2% higher on the day at 97.458.
    The Swiss franc though remained slightly elevated against the dollar, which slipped 0.2% to 0.9721
.
    
    ========================================================
    Currency bid prices at 12:14PM (1714 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1106        $1.1103     +0.03%         -0.93%      +1.1120     +1.1094
 Dollar/Yen       JPY=        109.4500       109.1200    +0.30%         +0.54%      +109.5700   +109.0200
 Euro/Yen         EURJPY=     121.58         121.17      +0.34%         -0.30%      +121.6900   +121.1400
 Dollar/Swiss     CHF=        0.9719         0.9737      -0.18%         +0.42%      +0.9747     +0.9712
 Sterling/Dollar  GBP=        1.3062         1.3097      -0.27%         -1.49%      +1.3124     +1.3014
 Dollar/Canadian  CAD=        1.3090         1.3037      +0.41%         +0.80%      +1.3104     +1.3026
 Australian/Doll  AUD=        0.6853         0.6865      -0.17%         -2.39%      +0.6880     +0.6851
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0798         1.0813      -0.14%         -0.50%      +1.0833     +1.0796
 Euro/Sterling    EURGBP=     0.8501         0.8478      +0.27%         +0.56%      +0.8533     +0.8472
 NZ               NZD=        0.6608         0.6646      -0.57%         -1.90%      +0.6658     +0.6601
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.8766         8.8683      +0.09%         +1.11%      +8.9024     +8.8550
 Euro/Norway      EURNOK=     9.8601         9.8523      +0.08%         +0.23%      +9.8854     +9.8397
 Dollar/Sweden    SEK=        9.4873         9.4593      +0.32%         +1.50%      +9.5007     +9.4444
 Euro/Sweden      EURSEK=     10.5395        10.5060     +0.32%         +0.67%      +10.5471    +10.4969
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Olga Kotaga in London; Editing by Chris
Reese)
  
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