FOREX-Yen, Swiss franc shine as trade tensions spark flight to safety

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

By Daniel Leussink
TOKYO, June 3 (Reuters) - The yen brushed a more than
four-month high against the dollar on Monday and the Swiss franc
rose as U.S. President Donald Trump's hard stance on trade
broadened to countries beyond China, stoking investor demand for
safe-haven assets.
With trade issues remaining front-and-centre, investor
appetite for risk has been dampened by fears of a global growth
slowdown that has helped stoke demand for government debt and
triggered an equity sell-off.
Perceived safe-haven assets were well supported despite a
private survey on the Chinese manufacturing sector CNPMI=ECI
pointing to a modest expansion in factory activity as export
orders bounced from a contraction. In a recent development, U.S. and Mexican officials were
preparing for trade talks after Trump vowed to impose punitive
tariffs on all Mexican goods in an intensifying dispute over
migration.
"The Mexican news is quite punchy. No one was really
expecting it to the same extent they were with China," said
Chris Weston, Melbourne-based head of research at foreign
exchange brokerage Pepperstone.
"Mexico is a huge trade partner with the U.S.," he said.
The Swiss franc CHF= rallied 0.3% against the dollar to
0.9975 and the yen JPY= gained 0.15% to 108.10 yen, its
highest since mid-January.
On Friday, the Japanese currency had booked its sharpest
daily rise in more than two years, climbing a little over 1.2%
during the session.
The yen is considered a safe haven asset in times of
geopolitical and financial turmoil as Japan is the world's
biggest creditor nation.
U.S. and Mexican officials were preparing on Sunday for
upcoming talks aimed at averting a trade clash after Trump said
he would apply 5% tariffs on the country's goods on June 10 if
it does not halt the flow of illegal immigration across the
U.S.-Mexico border. A day earlier, Mexico's president Andres Manuel Lopez
Obrador had hinted his country could tighten migration controls
to defuse tensions with Trump, saying he expected "good results"
from talks with Washington. The Mexican peso MXN=D4 , hit by Trump's sudden threat to
impose tariffs on Friday, regained some stability, trading at
19.6165 to the dollar, after its 2.5% fall on Friday.
Market participants also kept a focus on the trade dispute
between the United States and China, the world's two largest
economies.
A senior Chinese official and trade negotiator said on
Sunday Washington cannot use pressure to force a trade deal on
China and refused to be drawn on whether the leaders of the two
countries would meet at the G20 summit in Japan at the end of
the month to bash out an agreement. "Markets are trying to catch up with negative news in
relation to trade relations for the time being," said Kumiko
Ishikawa, senior analyst at Sony Financial Holdings.
"They're seriously starting to react to prolonged trade
tensions in a risk-off way."
The dollar dipped after benchmark 10-year U.S. Treasury
yields US10YT=RR hit as low as 2.121% on Monday, their lowest
since September 2017.
Against a basket of six major currencies, the dollar slipped
0.15% to 97.606 .DXY , though it is still up 1.5% for the year.
The euro EUR= gained 0.15% to $1.1185, rising for a second
session after tacking on 0.35% on Friday - its first gain in
five sessions.
The Australian dollar AUD=D4 was up 0.3% to hit a near
three-week high of $0.6958 on the back of the positive Chinese
factory activity reading.
The Aussie's gain came despite a New York Times report,
citing sources, that Trump had been urged to impose tariffs on
Australian imports in response to an increase in exports of
aluminium to the United States over the last
year. (Editing by Sam Holmes and Jacqueline Wong)