FOREX-Peso surges on U.S.-Mexico deal, euro sags

* U.S.-Mexico agreed deal on migration on Friday
* Yen, euro sag as dollar recovers across the board
* Chinese offshore yuan a whisker from 2019 low
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, June 10 (Reuters) - The Mexican peso surged more
than 2% on Monday after the United States and Mexico struck a
deal on migration to avert a trade tariff war, supporting a
rebound in investor risk appetite that boosted the dollar and
knocked the safe-haven yen lower.
Foreign exchange investors had rushed for the safety of the
Japanese yen in recent weeks after U.S. President Donald Trump's
threat to slap tariffs on Mexico shook investor confidence.
On Monday, the dollar staged a recovery as investors dumped
the yen and euro. Some analysts said the U.S. currency should
rebound as investors realised their assessment of the path for
Federal Reserve interest rate cuts was overly dovish.
The dollar's index rallied 0.3% to 96.824 .DXY . Against
the euro it rose 0.3% to $1.1304 EUR=EBS , with the single
currency also under pressure after sources told Reuters that
European Central Bank policymakers were open to cutting rates if
economic growth weakened. The Mexican peso MXN= rose more than 2% to 19.2275 pesos
per dollar after trading resumed for the first time following
Friday's migration agreement. (nL2N23E0MX) (nL2N23G03P)
Trump had threatened to impose 5% import tariffs on all
Mexican goods starting on Monday if Mexico did not commit to do
more to tighten its borders.
"While we should expect 'risk-on' type trading in the early
part of the week, we are very cautious over the sustainability
of any rebound in risk appetite," MUFG analysts said in a note,
citing caution about Mexico's backing for the deal's details and
worries Trump may push other trade disputes.
The yen shed 0.4% to 108.65 JPY=EBS after earlier hitting
its weakest since late May, though it remains 3.3% stronger than
its levels of April.
Bart Wakabayashi, Tokyo branch manager at State Street Bank,
said the lift to sentiment from the U.S.-Mexico deal would
"probably spill over to optimism with China and hopefully some
progress there."
"We've had trade talks with the EU, with Japan. Hopefully
these will start to turn to the positive narrative," he said.
The yuan CNY=CFXS brushed its lowest since late November
after weak import data that reignited worries about slowing
Chinese domestic demand. The offshore rate CNH=EBS was
slightly lower at 6.9488 yuan per dollar but held above Friday's
low.
The euro pulled back from 2-1/2 month highs hit on Friday in
the wake of an ECB meeting that investors viewed as less dovish
than expected.
The ECB did not - as some had anticipated - hint at rate
cuts in the face of a deteriorating economic outlook, instead
saying that rates would stay "at their present levels" until
mid-2020.
But on Sunday two sources told Reuters that policymakers
were open to cutting the ECB's policy rate again if economic
growth weakened and a strong euro hurt the bloc. Sterling was caught by the dollar's recovery, losing 0.2% to
$1.2709 GBP=D3 .