FOREX-Dollar steady after coming off 2-yr high, pressured by lower U.S. yields

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

By Daniel Leussink
TOKYO, May 24 (Reuters) - The dollar held steady on Friday,
having come off two-year highs on lower U.S. yields in the
previous session amid fears that a trade war with China will
hurt the U.S. economy more than previously thought.
The greenback was not helped by rising expectations for an
interest rate cut by the U.S. Federal Reserve later this year to
help boost the world's biggest economy.
Against a basket of key rival currencies, the dollar was
largely unchanged at 97.906 .DXY , having fallen from a
two-year high of 98.371 overnight. The index is still up 1.8%
for the year.
"Global risk aversion stemming from the intensifying
U.S.-China trade tension is causing the stronger yen," said
Masafumi Yamamoto, chief currency strategist at Mizuho
Securities.
"Markets are pricing in the potential negative impact on the
U.S. economy and the U.S. equity markets," he said, referring to
U.S.-China trade tensions.
On Thursday, President Donald Trump said U.S. complaints
against Huawei Technologies Co Ltd HWL.UL might be resolved
within the framework of a U.S.-China trade deal, while at the
same time calling the Chinese telecommunications giant "very
dangerous." The benchmark 10-year U.S. Treasury note yield US10YT=RR
was last up slightly at 2.3309%.
Overnight, it fell to its lowest since October 2017 after an
early read on U.S. manufacturing activity for May posted its
weakest pace of growth in almost a decade, suggesting a sharp
slowdown in economic growth was underway. There was only a 38.2% expectation on Thursday that U.S.
interest rates will be at current levels in October of this
year, compared to 58.3% a month ago, according to the CME
Group's FedWatch tool.
Against the yen, the dollar edged up to 109.695 yen, having
giving up two-thirds of a percent overnight to record its
steepest drop in a single session in two months.
The greenback is still 0.6% above a three-month trough of
109.02 yen touched on May 13.
The Australian dollar held steady at $0.6904 AUD=D4 ,
putting it on track to finish the week with a 0.5% gain, its
first positive weekly performance in six weeks.
Elsewhere in the foreign exchange market, the euro was flat
at $1.1183 EUR= , having bounced from a two-year low of
$1.11055 during the previous session.
The single currency came under pressure after a private
survey showed activity in Germany's services and manufacturing
sectors fell in May, aggravating fears about the effect of
unresolved trade disputes on Europe's largest
economy. Compounding these worries, European parliamentary elections
began on Thursday with eurosceptic parties expected to do well,
raising concerns about the single currency's stability.