FOREX-Dollar on defensive as Trump's impeachment inquiry, weak data weigh

* U.S. House Speaker announces launch of impeachment inquiry
* Impeachment process could drag on, may disrupt Sino-U.S.
talks
* Trump steps up rhetoric on China, dampens trade deal hopes
* Pound buoyed after Supreme Court ruling, outlook unclear
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Hideyuki Sano
TOKYO, Sept 25 (Reuters) - The dollar steadied in Asian
trade on Wednesday but remained on the defensive after the
launch of a formal impeachment inquiry against President Donald
Trump, while the political uncertainty added to worries about
economies strained by the Sino-U.S. trade row.
Following reports Trump sought foreign help to smear
Democratic presidential front-runner Joe Biden, House Speaker
Nancy Pelosi announced the House would initiate a formal
inquiry, saying Trump appeared to have undermined national
security and violated the U.S. Constitution. The dollar bounced slightly in Asia after falling in U.S.
trade overnight following Pelosi's move, which was announced
late on Tuesday.
"There was a bit of position unwinding in Asia. After all,
the impeachment process could take months. Still, it's not good
news (for the dollar)," said Koichi Kobayashi, manager of
currency trade at Mitsubishi UFJ Trust Bank.
The dollar ticked up 0.2% to 107.28 yen JPY= , having
slipped to a two-week low of 106.96 the previous day.
The safe-haven Swiss franc edged back to 0.9866 franc per
dollar CHF= from near three-week high of 0.9845 to the dollar
on Tuesday.
The euro, which was battered by weak euro zone economic data
earlier this week, inched down 0.2% to $1.1001 EUR= , a hair's
breath off Monday's low of $1.0966.
Trump promised on Tuesday to release a transcript of his
phone call with Ukrainian President Volodymyr Zelenskiy amid
reports he withheld nearly $400 million in U.S. aid to Ukraine
as leverage to get Zelenskiy to launch a probe that would damage
Biden.
Although it is far from certain whether the inquiry will
eventually lead to an impeachment, which needs a two-thirds
majority in the Republican-controled Senate, increased political
uncertainty is seen as negative for the dollar.
Some market players also suspect domestic political fights
will consume Trump's political capital, making it harder for him
to strike any compromise with China on trade and other issues.
On Tuesday, Trump's rhetoric on China turned harsh once
again as he delivered a stinging rebuke to Beijing's trade
practices at the United Nations General Assembly, saying he
would not accept a "bad deal" in U.S.-China trade negotiations.
China's top diplomat Wang Yi quickly hit back, saying
Beijing would not be threatened on trade or allow interference
in its affairs, including Hong Kong, while having no intention
to "play the Game of Thrones on the world stage". "Trump's speech was full of sensitive words for China -
trade practices, currencies, freedom of religion and so on. It
is not hard to imagine it will irritate China," said Daisuke
Uno, chief strategist at Sumitomo Mitsui Bank.
"In the past China has reacted to U.S. pressure on trade by
bringing down the yuan. It appears we are having that settings
again," he said.
The Chinese yuan was steady at 7.1088 per dollar in onshore
trade CNY=CFXS , keeping some distance from 11-1/2-year lows of
7.1854 touched earlier this month.
The dollar was also undermined by data showing U.S. consumer
confidence USCONC=ECI fell by the most in nine months in
September, far more than expected. "Net-net, consumer confidence plunged in September which
counts as a big surprise that may sidetrack the economic
expansion that is relying on consumer spending to fuel growth,"
said Chris Rupkey, chief financial economist at MUFG Bank in New
York.
"This unwelcome news on souring consumer spirits is a
startling new development that could even bring more rate cuts
later this year from the Federal Reserve," he said.
Elsewhere, the British pound found some support after the UK
Supreme Court ruled that Prime Minister Boris Johnson's decision
to suspend parliament for five weeks was unlawful in a further
blow to his ambition to pull Britain out of European Union next
month with or without a deal. Still, market players saw no signs of a sustainable rebound
as the events further deepened the uncertainty investors now
attach to the currency.
Sterling changed hands at $1.2467 GBP=D4 , down 0.2% on the
back of a broad pullback in the dollar in Asia but still not far
from two-month high of $1.2582 set last week.
The New Zealand dollar edged up 0.16% to $0.6333 NZD=D4
after the Reserve Bank of New Zealand kept interest rates on
hold, as widely expected.