* Mnuchin tells FT he sees USD strength in long term as
* USD/JPY gains limited by caution before US-Japan economic
* Aussie slips from 2-week highs on weaker iron ore prices
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, April 18 The dollar steadied against the
yen on Tuesday, with worries that U.S. currency manipulation
complaints could touch Japan offset by U.S. Treasury Secretary
Steven Mnuchin's favouring of a strong dollar in the long term.
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 saw the currency's
strength over the long term as a positive.
But upbeat words from the two sides after the first round of
talks in Tokyo failed fully to quell worries among investors
that Japan's long-running efforts to weaken the yen will affect
Concerns about North Korea and French presidential elections
also kept a lid on the dollar against the yen, traditionally a
haven for capital in the face of political and economic stress.
"There was quite strong thinking in the market that the U.S.
would maybe put pressure on Japan in terms of currency
manipulation ... on that front," said Neil Jones, head of hedge
fund FX sales at Mizuho in London.
The dollar was last flat at 108.870 yen after rising in
Asian trade to 109.225. It had sunk into a five-month trough of
108.130 earlier on Monday amid rising tensions in the Korean
Peninsula, which some analysts warned also brought a new
dimension to the Japanese relationship.
"Trump appears to have made a concession regarding China, a
key player in the North Korean situation," said Makoto Noji,
senior strategist at SMBC Nikko Securities, referring to last
week's U.S. Treasury's semi-annual currency report in which the
Trump administration backed away from a key campaign promise and
did not label China a currency manipulator.
"But at the same time, for the sake of his supporters, Trump
has to stick with his pledge to tackle trade imbalances, and
this raises the risk of his administration getting tough with
Japan," Noji said.
The dollar index, measuring it against a basket of major
currencies, was 0.1 percent lower at 100.25 after rising
to 100.40 earlier in the session.
The euro was a shade higher at $1.06490, having seen
limited movement on Monday when many European markets were shut
for the Easter holiday.
Weaker prices for iron ore continued to weigh on the
Australian dollar, which dipped 0.6 percent to $0.7540 after
rising to a two-week high above $0.7600 on the back of upbeat
Chinese growth data.
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
(Reporting by Ritvik Carvalho; additional reporting by Tokyo
Markets team; Editing by Tom Heneghan)