FOREX-Dollar falls as oil attacks send investors to safety

* Attacks on Saudi oil facilities drive risk-off trade
* Dollar weakens as yen, oil-correlated currencies rise
* Fed, BoJ in focus later in the week

SINGAPORE, Sept 16 (Reuters) - The dollar fell while
safe-havens and currencies of oil producing countries rallied on
Monday, following an attack on Saudi Arabian refining facilities
that disrupted global oil supply and heightened Middle East
tensions.
Oil prices surged more than 15% following the strikes on two
plants, including the world's biggest petroleum processing
facility in Abqaiq, knocked out more than 5% of global oil
supply. Yemen's Iran-aligned Houthi group claimed responsibility for
the damage, but the U.S. has pointed the finger directly at
Iran. The Canadian dollar CAD=D3 rose 0.5% in morning trade in
Asia to 1.3224 per dollar. The Norwegian krone NOK= rose
almost 0.6% to 8.9363 per dollar.
Both currencies often move together with the oil price
because the countries are major oil exporters.
The attacks wiped out last week's ebullient risk appetite
and prompted U.S. President Donald Trump tweeted the United
States was "locked and loaded" for a response.
The safe-haven Japanese yen and Swiss franc each lifted at
least 0.3% on the dollar. The yen JPY=EBS hit 107.60 per
dollar and the franc CHF= touched $0.9871. Gold XAU= jumped
by 1%.
Against a basket of currencies .DXY the dollar was 0.2%
lower at 98.053.
"If that part of the reason for last week's fall in oil and
improvement in geopolitical risk sentiment was the news of John
Bolton's sacking ... and thoughts this was a precursor to some
form of rapprochement between Trump and Iran, then it is no
longer valid," said Ray Attrill, head of FX strategy at National
Australia Bank in Sydney.
Beyond oil, currency markets are awaiting the outcome of
central bank meetings in the U.S. and Japan this week and
crucial economic data in Australia and New Zealand that could
determine the rates outlook in the Antipodes.
Much of the risk appetite on display last week was driven by
signs of a thaw in U.S.-China trade tensions, with both sides
offering olive branches ahead of trade talks next month.
However with few solid signs of progress, sentiment remains
fragile.
"Geopolitical risks and central bank rhetoric remain key
drivers of risk this week," Australia and New Zealand Banking
Group analysts said in a note.
In the United States, investors who had begun trimming
expectations for a U.S. Federal Reserve rate cut on Wednesday
are now certain rates will fall and divided only over how much.
FEDWATCH
Markets also expect the Bank of Japan to push interest rates
further into negative territory, with a third of economists
polled by Reuters last week expecting stimulus to be ramped up.
Japanese markets are closed on Monday for a public holiday.
China's premier on Monday said maintaining national economic
growth above 6% is difficult, with protectionism weighing.
Retail sales and industrial production figures due on Monday
are likely to give further insight into the health of the
world's second-largest economy. The Chinese yuan was flat in
morning trade offshore CNH= .
The pound GBP=D3 held last week's gains, as fears of
Britain crashing out of the European Union without a divorce
deal ebbed, while a news report on Friday also raised hopes that
a deal could be secured by Oct. 31. It steadied just under its highest since July 25 at $1.2491.
The euro EUR=D3 was steady at $1.1077.