FOREX-Cautious investors push dollar lower on mixed trade signals

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Recasts, new throughout; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Aug 27 (Reuters) - The dollar fell modestly
against the Japanese yen on Tuesday, suggesting investors were
skeptical of the optimism expressed by President Donald Trump on
the possibility of a U.S.-Chinese trade deal days after the two
countries raised tariffs against each other.
On Friday, China said it would increase tariffs on $75
billion worth of American goods. The United States retaliated by
saying it would raise existing tariffs on $250 billion worth of
Chinese goods to 30% from 25% on Oct. 1.
On Monday, speaking on the sidelines of the G7 summit of
world leaders in France, Trump said Chinese officials had
contacted U.S. trade counterparts overnight and offered to
return to the negotiating table. Trump's comments sparked a wave
of so-called risk-on trades, which initially boosted the dollar,
weakened safe-haven currencies, and lifted stock markets.
However, doubts crept in after a Chinese Foreign Ministry
spokesman said he was unaware that a phone call had taken place.
The Commerce Ministry, which typically releases statements on
trade calls, did not respond to a request for comment.
The Japanese yen JPY= strengthened 0.08% to 106.03 and the
10-year Treasury yield US10YT=RR fell on Tuesday as investors
fled to safer assets. The yen's gain was not as strong as
Monday's, when it reached a 2-1/2 year high. The yen has gained
3.3% against the dollar this year as the trade war drives
traders to safe-haven assets.
"Safer bets are outperforming as the dust settles on trade
war developments that left uncertain whether the U.S. and China
would strike a deal anytime soon. Persistent trade uncertainty
is credited with slowing the global economy and leaving it
vulnerable to tipping into recession," said Joseph Manimbo,
senior market analyst at Western Union Business Solutions.
The 10-year U.S. Treasury yield US10YT=RR fell to a low of
1.500%. It was last at 1.513% while the yield on the two-year
yields was at 1.549% US2YT=RR , maintaining an inverted yield
curve, a sign of a future recession.
The offshore Chinese yuan, sensitive to the U.S.-China trade
dispute, was steady on Tuesday after plunging to a record low of
7.1870 against the dollar the day before. It last traded at
7.162 CNH= .
Elsewhere, the euro was trading at $1.1097 EUR= easing off
earlier lows as Italian stocks rallied on hopes that a snap
election could be avoided by an arrangement to form a new
government in Rome. The pound was up 0.43% at $1.2266 GBP= and by 0.46%
against the single currency at 90.44 pence EURGBP= as
Britain's opposition Labour Party leader, Jeremy Corbyn, said he
would do everything necessary to prevent Britain leaving the
European Union without a divorce deal on Oct 31.