FOREX-Dollar edges higher as Hong Kong tensions fuel safe-haven demand

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* U.S.-China tensions on the rise
* Risk aversion supports dollar
* Sterling eyes British politics

By Stanley White
TOKYO, May 25 (Reuters) - The dollar edged higher on Monday
as worries about a standoff between the United States and China
over civil liberties in Hong Kong fuelled demand for safe-haven
currencies.
Sterling was on the defensive after members of British Prime
Minister Boris Johnson's party called for the resignation of an
influential aide for breaking travel restrictions during the
coronavirus lockdown.
A senior White House official has said Beijing's plan to
impose a security law on the former British colony of Hong Kong
could lead to U.S. sanctions, which could worsen an already
tense relationship between the world's two-largest economies.
"The biggest concern is the tension between the United
States and China," said Takuya Kanda, general manager of
research at Gaitame.com Research Institute in Tokyo.
"Things were already bad, and it is likely to get worse
because of the Hong Kong security law. This supports risk-off
trades, which is positive for the dollar and the yen."
The dollar traded at $1.0904 against the euro EUR=D3 on
Monday in Asia, close to its strongest in a week.
The dollar bought 0.9718 Swiss franc CHF=EBS , also close
to a one-week high.
The greenback edged up to 107.75 yen JPY=EBS .
Trading may be subdued on Monday, because financial markets
in Singapore, Britain, and the United States are closed for
public holidays.
China's proposed national security legislation for Hong Kong
could lead to U.S. sanctions and threaten the city's status as a
financial hub, White House National Security Adviser Robert
O'Brien said on Sunday. Hong Kong police fired tear gas and water cannons to
disperse thousands of people who rallied on Sunday to protest
Beijing's national security law. Washington and Beijing are also at loggerheads over Chinese
companies' access to advanced technology and criticism of
China's response after the novel coronavirus emerged late last
year in Hubei.
The threat of sanctions over Hong Kong risks a repeat of
last year's damaging trade war between the United States and
China.
The British pound GBP=D3 was little changed at $1.2187.
Against the euro, sterling traded at 89.51 pence EURGBP=D3 .
Johnson has backed his senior adviser Dominic Cummings on
Sunday, despite calls from within his own Conservative Party for
the aide to resign.
Cummings, who is the architect of the 2016 campaign to leave
the EU and widely considered to be Johnson's most influential
strategist, came under pressure after reports he travelled to
northern England from London during a nationwide lockdown in
March when his wife was ill with COVID-19 symptoms.
The Australian dollar AUD=D3 rose slightly to $0.6545 amid
growing optimism about the country's emergence from coronavirus
lockdowns.
In New South Wales, which includes the city of Sydney,
children returned to full-time face-to-face learning on Monday,
allowing many parents to return to offices. Australian states are pressing ahead with a three-stage plan
to remove most social restrictions imposed by July.
Across the Tasman Sea, the New Zealand dollar NZD=D3 was
little changed at $0.6105.