4 Min Read
* Dlr/yen slumps to 5-mth low
* Trump says prefers low interest rates
* Trump comments raise wariness over Treasury's currency report
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, April 13 (Reuters) - The dollar recovered from a two-week low against a broad index on Thursday, having slid after U.S. President Donald Trump said the currency was getting too strong and that he would prefer the Federal Reserve to keep interest rates low.
The greenback and U.S. Treasury yields took a heavy hit after Trump's comments to the Wall Street Journal, in which he said the strength of the economy would hurt the dollar.
But after losing 0.6 percent on Wednesday - its biggest one-day fall in over three weeks - the dollar recovered on Thursday, trading up 0.3 percent on the day by 1150 GMT.
Having hit a five-month low of 108.73 in early Asian trading, the dollar steadied at 109.14 yen.
"This is a little bit of a correction of the move we saw overnight following the comments from Trump," said Commerzbank currency strategist Thu Lan Nguyen, in Frankfurt. "Yes, it was negative what he said...but it’s not a big surprise – it wasn’t a U-turn in his rhetoric on the exchange rate so far,"
"The question is: is he able to influence monetary policy in order to get a weaker dollar? That is still an open question."
Trump's comments broke with a long-standing practice of both U.S. Democratic and Republican administrations refraining from commenting on policy set by the independent Federal Reserve. It is also unusual for a president to talk about the value of the dollar, a subject usually left to the U.S. Treasury secretary.
The comments were seen by markets as a fresh reminder of the president's protectionist trade rhetoric, which has been a source of concern for dollar bulls.
"Bearing in mind the administration’s continued verbal intervention in the FX market, we think that any near-term rallies in the dollar could stay relatively limited, despite the Fed raising rates at a moderate pace," said IronFX analyst Sakis Paraskevov in Cyprus.
The dollar has shed 2 percent against the yen so far this week, with the safe-haven Japanese currency on a bullish footing because of a rise in geopolitical tensions.
Investors are concerned about the upcoming French presidential election as well as possible U.S. military action against Syria and North Korea and an escalation of tensions with Russia.
That Trump seemed unmoved by the already significant weakening of the dollar against the yen increased nervousness about the U.S. Treasury's semi-annual currency report due Friday, and next week's U.S.-Japan bilateral dialogue.
The euro fell 0.4 percent to $1.0626.
The dollar was on track for its third straight day of losses against China's yuan, after rising to a one-month high at the start of the week.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Hugh Lawson and Susan Thomas)