January 9, 2020 / 1:54 PM / 8 days ago

FOREX-Yen surrenders gains vs dollar as U.S.-Iran tension fades

    * Japanese yen falls to week-and-a-half low
    * Dollar, Swiss franc down as well 
    * Chinese yuan rises to five-month high vs dollar
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds new comment, FX table, updates prices, changes byline,
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 9 (Reuters) - The safe-haven yen fell to a
more than a one-week low 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 0.2% at
109.39 yen, after earlier hitting 109.48 yen, its highest
since Dec. 30.
    "Trump completely downplayed the idea of going to war with
Iran or even any sort of retaliatory measures," said Brad
Bechtel, managing director, Jefferies in New York. 
    "His decision to take the higher ground and ease the
emotions around the tit for tat have ... acted to soothe markets
and the bid tone to risk assets returned immediately," he added.
    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 that 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. Negotiating teams from both sides remain in close
communication on the particular arrangements of the signing, Gao
told reporters at a regular briefing.
    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.
    China's yuan rose to a five-month high of 6.9175 against the
dollar overnight in the offshore market, boosted also
by a steady inflation readout. 
    In early morning trading, the dollar index was higher on the
day, up 0.1% at 97.428.
    The Swiss franc though remained elevated against the dollar,
which fell 0.2% to 0.9722.
    
    ========================================================
    Currency bid prices at 8:37 AM (1337 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1111        $1.1103     +0.07%         -0.88%      +1.1120     +1.1097
 Dollar/Yen       JPY=        109.3700       109.1200    +0.23%         +0.47%      +109.4800   +109.0200
 Euro/Yen         EURJPY=     121.55         121.17      +0.31%         -0.33%      +121.6300   +121.1400
 Dollar/Swiss     CHF=        0.9720         0.9737      -0.17%         +0.43%      +0.9747     +0.9720
 Sterling/Dollar  GBP=        1.3039         1.3097      -0.44%         -1.66%      +1.3124     +1.3014
 Dollar/Canadian  CAD=        1.3056         1.3037      +0.15%         +0.54%      +1.3059     +1.3026
 Australian/Doll  AUD=        0.6863         0.6865      -0.03%         -2.25%      +0.6880     +0.6855
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0800         1.0813      -0.12%         -0.48%      +1.0833     +1.0801
 Euro/Sterling    EURGBP=     0.8519         0.8478      +0.48%         +0.77%      +0.8533     +0.8472
 NZ               NZD=        0.6616         0.6646      -0.45%         -1.78%      +0.6658     +0.6611
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.8699         8.8683      +0.02%         +1.04%      +8.9024     +8.8550
 Euro/Norway      EURNOK=     9.8556         9.8523      +0.03%         +0.18%      +9.8854     +9.8397
 Dollar/Sweden    SEK=        9.4709         9.4593      +0.17%         +1.32%      +9.4953     +9.4444
 Euro/Sweden      EURSEK=     10.5238        10.5060     +0.17%         +0.52%      +10.5430    +10.4969
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Olga Kotaga in London)
  
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