* Yen rises to two-week highs
* Dollar index surrenders all of its ‘Trump bump’
* Downbeat U.S. housing data offsets strong manufacturing report
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, May 17 (Reuters) - The yen rose to its highest in two weeks and the Swiss franc hit a seven-week high against the U.S. dollar on Wednesday as an intensifying political scandal around U.S. President Donald Trump fuelled demand for safe-haven assets.
The dollar index, which scaled a 14-year peak of 103.82 on Jan. 3 in anticipation of Trump’s promised tax reform and stimulus measures, wallowed near its lowest levels since Nov. 9 after giving back all of its “Trump bump”.
“On the back of increased uncertainty when it comes to Trump, global risk sentiment has turned a little more unstable,” Credit Agricole currency strategist Manuel Oliveri said, noting higher cross market volatility in recent trading days.
“But from a broader angle we are nowhere close to call the current markets risk-averse. This could obviously change.”
News emerged on Tuesday that Trump had asked his now-dismissed FBI chief James Comey to end the agency’s investigation into ties between former White House national security adviser Michael Flynn and Russia.
That raised questions about whether Trump, who fired Comey on May 9 and was accused last week of disclosing sensitive information to the Russians, tried to interfere with a federal investigation.
The yen rose to 0.7 percent to 112.26 yen per dollar, its highest level since May 5, while the Swiss franc rose to 0.9820 francs per dollar, its highest since March 27.
The dollar index, which tracks the U.S. currency against a basket of six major rivals, was last at 98.118, flat on the day.
Investors had already begun to doubt Trump’s ability to get a divided U.S. Congress to support his promised policy steps.
“Investors need to see if he (Trump) can carry out all of his original ideas, compromise, and get organised,” said Kaneo Ogino, director at FX research firm Global-info Co in Tokyo.
The euro climbed above $1.11 overnight, and hit $1.1122, its highest level since Nov. 9, in early European trading hours. It was last up 0.1 percent at $1.1089. EUR-EBS
Against the resurgent Japanese currency, it tumbled half a percent to 124.68 yen, as investors locked in gains after the euro reached a 13-month high of 125.815 on Tuesday.
Data on Tuesday showed the euro zone growing at 1.7 percent year-on-year in the first quarter, as expected. A final estimate of euro zone inflation for April is due at 0900 GMT.
“This more detailed release will show how much of the change was due to Easter timing effects (the price of those items affected by the timing of Easter are also included in the ECB’s core inflation measure) or whether some pick-up in broader underlying inflation might be emerging,” RBC Capital Markets’ head of FX strategy Elsa Lignos wrote in a note.
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 Tokyo Markets Team; Editing by Catherine Evans)