FOREX-Bond yield slump hits dollar, pound; Swedish crown the exception

* Dollar index nudged off 2-week highs
* Global bond yields fall on dovish cbanks, fading trade
optimism
* Swedish crown firms as Rijksbank holds policy tightening
line
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates throughout, changes byline, dateline)
By Sujata Rao
LONDON, July 3 (Reuters) - The dollar slipped to a one-week
low against the Japanese yen on Wednesday, undermined by the
steady fall in U.S. Treasury bond yields, fading optimism over
the Sino-U.S. trade deal and the possibility of fresh tariff
hostilities with Europe.
More and more currencies are under pressure from central
banks' increasingly dovish tone, though the Swedish crown stood
out, firming to 2-1/2 month highs versus the euro after the
central bank said it was on track to tighten policy by early
2020.
Against a basket of six major currencies, the dollar pulled
back from two-week highs scaled on Tuesday .DXY as U.S. bond
yields extended the previous day's heavy fall, with 10-year
yields hitting 2-1/2-year lows.
The other currency in focus was the pound, which fell on
Tuesday in tandem with British government bond yields.
Ten-year gilt yields slipped below the Bank of England's
main policy rate for the first time since the 2008 crisis after
markets interpreted BOE Governor Mark Carney's comments as
dovish. Sterling slipped 0.2% to a new two-week low GBP=D3 .
"Two movers today are the yen, which is the risk-off safe
haven, and the pound which keeps heading lower," Colin Asher,
senior economist at Mizuho, said, adding that it had seemed
"like Carney is potentially teeing up a rate cut."
The yen firmed 0.23% to the dollar JPY=D3 at 107.6 yen as
investors grew more sceptical about the possibility of a speedy
resolution to the trade war, especially given U.S. President
Donald Trump's comments that any deal would have to be tilted in
favour of the United States. Sentiment was also dented by Washington's threat of tariffs
on $4 billion of additional European Union goods in a
long-running dispute over aircraft subsidies. Currencies are also under pressure from signs that more and
more central banks are set to ease monetary policy to combat
economic slowdown.
"The dovish stuff from central banks is pushing yields down
across the board. It's starting to look like the weakness in
manufacturing is starting to spread to the services sector and
that's an alarm bell, a sort of green light to central banks to
ease policy," Asher said.
However, Sweden's central bank held its line on policy
tightening by year-end or early-2020, noting a "good" inflation
and economic outlook.
The Swedish crown rallied to 2-1/2 month highs against the
euro of 10.4890 EURSEK=D3 and rose into positive territory
versus the dollar SEK=D3 .
The euro was little changed at $1.128 EUR= following a
volatile session on Tuesday, when it swung between a low of
$1.1275 and a high of $1.1322.
The common currency briefly received a lift on Tuesday after
a media report that European Central Bank policymakers would not
rush to cut rates at their July meeting. But it later slipped
after IMF Managing Director Christine Lagarde, perceived as a
policy dove, was nominated as the next ECB president.
Yields across the euro zone have fallen further, with German
10-year yields on the cusp of falling under the ECB's minus
0.40% level DE10YT=RR .
Lagarde's nomination if confirmed "should ensure a
continuation of the pragmatic approach to policy-setting at the
ECB favoured by (current president Mario) Draghi," analysts at
Daiwa said.