FOREX-Commodity currencies creep back, but Sino-U.S. tensions temper mood

* AUD, NZD edge higher after recouping Monday's losses
* Heightened Sino-U.S. tensions drag on yuan
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, May 5 (Reuters) - The dollar handed back a sliver
of recent gains to commodity currencies on Tuesday as oil prices
bounced back, but hung on against the yuan as traders weighed
optimism about a coronavirus recovery in China against fears
about rising Sino-U.S. tensions.
The Australian and New Zealand dollars inched ahead, after
recouping Monday's falls - putting the Aussie AUD=D3 back over
64 cents at $0.6445 and the kiwi NZD=D3 holding on at $0.6062.
Public holidays in Japan and China lightened trade, while
caution on the global growth outlook and looming Australian and
New Zealand central bank meetings capped further moves. AUD/
The yuan CNH= rose to 7.1190 per dollar in offshore trade,
recovering from a six-week low of 7.1560 hit in the previous
session, but well below the range where it spent last month.
U.S. President Donald Trump has stepped up verbal attacks on
China ahead of a Nov. 3 U.S. presidential election where both he
and Democratic contender Joe Biden are jostling to project a
tough stance against the United States' main strategic rival.
An internal Chinese report warns that Beijing faces a rising
wave of worldwide hostility in the wake of the outbreak that
could tip relations with the United States into confrontation,
people familiar with the paper told Reuters. Trump has floated tariffs, or even reneging on U.S. debt
obligations to China as retaliatory possibilities as he seeks to
pin blame for the COVID-19 pandemic, tempering traders' optimism
about progress towards economic recovery elsewhere.
"The yuan is that bellwether that everybody's going to be
looking at," said Stephen Innes, chief global market strategist
at AxiCorp. Its softness muted gains in Asian currencies, such
as Malaysia's ringgit MYR= , he said, even as oil prices
bounced.
The cautious trading backdrop also pushed the yen ahead
slightly to 106.53 per dollar JPY= , within striking distance
of multi-month lows.
U.S. crude rose CLc1 about 5% and Brent LCOc1 around 3%
as production fell and countries around the globe including
Italy, Finland and several U.S. states eased lockdown
restrictions. O/R
Elsewhere, the euro was pressured by a court challenge from
German academics to the European Central Bank's bond buying
program. A ruling is due later on Tuesday and while outright
rejection of the German Bundesbank's participation in the asset
purchases appears unlikely, anything less than a clear-cut
defeat of the challenge could hit the single currency.
The euro EUR= last sat at $1.0914, close to a week-low hit
overnight. The pound GBP= was rangebound at $1.2461.
The Reserve Bank of Australia (RBA) is due to announce its
interest rate settings at 0430 GMT, with markets focused on
commentary in the statement since a policy change is unlikely.
"The RBA's post-meeting statement could spark some AUD
volatility if it offers further insights into the RBA's latest
economic forecasts," said Commonwealth Bank of Australia FX
analyst Kim Mundy.