* Dollar index trades near lowest levels since late March
* Sterling soars to more than 6-month highs
* Worries about French election, N. Korea loom in background
TOKYO, April 19 The dollar index traded near
three-week lows on Wednesday, dragged down by a resurgent
sterling after British Prime Minister Theresa May called for an
early general election ahead of Brexit negotiations.
The British currency sailed to more than six-month highs
after May said the election would "secure the strong and stable
leadership" position needed for talks with the European Union
about terms for the looming exit.
The dollar index, which tracks the greenback against a
basket of six rival currencies, edged up 0.1 percent to 99.548
, not far from its overnight low of 99.465, its deepest
trough since March 28.
Sterling was steady on the day at $1.2845 after
rising as high as $1.2908 on Tuesday, its highest since early
October, as investors scurried to cover short positions.
"May's decision to hold a vote gave sterling a lift higher,"
said Masafumi Yamamoto, chief currency strategist at Mizuho
Securities in Tokyo.
"In the background, we still have other issues such as North
Korea, which could weigh on risk sentiment, as well as the
French election," he said.
The failed North Korean missile test over the weekend was an
attempt by the reclusive country to "provoke something," U.S.
Defense Secretary Jim Mattis said on Tuesday, pledging that the
United States will work with China to reduce tensions.
The dollar edged up 0.1 percent to 108.57 yen, while
the euro was steady on the day at $1.0732 after riding
sterling's coattails to three-week highs overnight.
French opinion polls show that far-right leader Marine Le
Pen and centrist Emmanuel Macron qualifying next Sunday for the
May 7 run-off, but the gap with conservative Francois Fillon and
far-leftist Jean-Luc Melenchon has been tightening.
Downbeat U.S. economic data also pushed down U.S. Treasury
yields and weighed on the dollar. U.S. homebuilding fell in
March, and manufacturing output dropped for the first time in
Investors also continued to monitor U.S.-Japan economic
talks for clues to the future direction of U.S. trade policy
under President Donald Trump, who campaigned on a protectionist
A senior government official said that Japanese Deputy Prime
Minister Taro Aso and U.S. Vice President Mike Pence did not
discuss currencies in the first round of the bilateral economic
(Reporting by Tokyo markets team; Editing by Sam Holmes)