FOREX-Dollar, yen fall as global tensions ease, pound rallies

* Hong Kong, Italy, Britain news helps risk appetite
* Euro lifted away from 28-month lows, Lagarde comments help
* Sterling jumps as UK lower house votes on Brexit, election
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates after UK house votes, add quotes)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 4 (Reuters) - The safe-haven dollar and yen
fell on Wednesday after global political worries eased with what
markets perceived as positive news in Hong Kong, Italy and
Britain.
Sterling hit a one-week high against the dollar as investors
grew more optimistic after British lawmakers took steps to block
a no-deal Brexit. Risk appetite rose on news that Hong Kong leader Carrie Lam
was withdrawing an extradition bill that triggered months of
often violent protests. Edward Moya, senior market analyst at OANDA in New York,
said the dollar's weakness was triggered by this "risk-on move
in Hong Kong that gave Hong Kong equities one of the best moves
in a few years." That has boosted appetite for riskier
currencies that have generally higher yields, he added.
Moya said, "This is providing a little bit of unwinding of
some dollar bullish positions."
In Italy, Prime Minister Giuseppe Conte unveiled a new
cabinet that united the anti-establishment 5-Star Movement and
the centre-left Democratic Party, an unlikely coalition that is
expected to improve ties with the European Union. The dollar ended down 0.6% against a basket of major
currencies, at 98.403 .DXY , marking its biggest one-day loss
in three months.
The yen fell against the dollar, which rose 0.42% to 106.41
yen JPY=EBS . It also declined against the euro, which gained
0.99% to 117.43 yen EURJPY=EBS .
The euro also rose 0.57% versus the dollar to $1.1035
EUR=EBS after the UK parliamentary votes and comments from
Christine Lagarde, who will likely be the European Central
Bank's next president, introduced some doubt over the scale of
an ECB stimulus package expected next week.
Lagarde said highly accommodative monetary policy for a
prolonged period was necessary but she added that the bank
needed to be mindful of the negative side-effects of such tools.
Expectations for an interest rate cut, the relaunch of asset
purchases and other ECB measures to stimulate the economy have
weighed on the euro. On Tuesday, it hit a 28-month low around
$1.0924.
Meanwhile, sterling jumped 1.37% to $1.2253 GBP=D3 , and
against the euro it rallied 0.85% to 90.03 pence EURGBP=D3 . It
produced its biggest one-day gain against the dollar since March
13, while it improved to its strongest level against the single
currency in over a month.
The lower house of the British parliament voted on Wednesday
to prevent Prime Minister Boris Johnson taking Britain out of
the EU without a deal. It also rejected Johnson's call for a
snap election on Oct. 15, just weeks before Brexit, to free his
hands.
"There is no way the UK leaves empty-handed. At this point,
if there is enough popular pressure, there will be perhaps a
second referendum on the Brexit question," said Juan Perez,
senior currency trader at Tempus Inc in Washington.