FOREX-Euro drops to two-week low against the dollar

* Appetite for safe-haven currencies recedes
* Dollar maintains gains
* China's central bank fixes yuan lower than expected
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga and Stanley White
LONDON, Aug 16 (Reuters) - The euro fell to a two-week low
on Friday against the dollar, which extended the gains it made
the day before after U.S. retail sales data came out better than
expected .
The dollar was on course to end the week up against the
euro, the Japanese yen and the Swiss franc as investors returned
to riskier assets. A stable offshore Chinese yuan helped improve
risk appetite.
The euro was down by 0.2% at $1.108875 EUR=EBS , the lowest
it has been since Aug. 2.
Measured against a basket of six major currencies .DXY ,
the dollar was higher in the early London trading at 98.210. It
has recovered by about 1% from its three-week low on Aug. 9.
Data showing U.S. consumers kept spending in July came as a
relief after the U.S. Treasury yield curve inverted this week,
which historically has preceded U.S. recessions The inversion stoked worries about the impact of the
Sino-U.S. trade war. The curve steepened a little on Friday
US2US10=RR .
China on Thursday said it would retaliate for the latest
U.S. tariffs on $300 billion of Chinese goods, but U.S.
President Donald Trump said any pact would have to be on
America's terms, suggesting a resolution to the trade war
remains elusive China's offshore yuan, whose plunge past 7 to the dollar
last week sent shivers through financial markets, was weaker on
Friday at 7.0530 CNH=EBS . The People's Bank of China fixed the
onshore yuan currency at 7.0312 on Friday, compared with market
expectations at 7.0307, according to analysts at Commerzbank.
"While it was roughly in line with expectations, it might be
worth noting that since yesterday, the actual dollar/onshore
yuan fixing rates have been slightly higher than the estimates,"
the analysts said.
The fragile calm is unlikely to last, traders said.
"The most important point is there are more signs of a
global economic slowdown," said Tsutomu Soma, general manager of
fixed income business solutions at SBI Securities in Tokyo.
"Rates will continue to fall, and investors will pull back
from risk, which means money will leave emerging markets and go
to Treasuries, the Swiss franc, gold, and the yen."
Sterling GBP=D3 was up 0.3% at $1.2118, close to a
one-week high of $1.2150 and on course for its first weekly gain
since mid-July. Encouraging data on British retail sales and
consumer prices suggested the British economy was in better
shape than some investors had feared.
Against the euro, the pound reached an 11-day high of 91.50
pence EURGBP=D3 .
However, the risk remains that Prime Minister Boris Johnson
will take Britain out of the European Union without a transition
agreement, causing short-term economic turmoil.
"I think sterling is likely to be more of a two-way market
now as those opposed to Brexit rage, rage against the dying of
the light. At the same time, we can't expect the Brexit
supporters, who have gotten this far, to just cry how bright
their frail deeds might have danced in a green bay," said
Marshall Gittler, chief strategist at ACLS Global.