FOREX-Dollar stumbles to 9-wk low against safe-haven yen as Mideast tensions flare

* Dollar index edges away from 6-mth lows, but eases on yen
* Eyes on U.S. factory survey after poor UK, EU results
* Asia markets orderly on anniversary of 'flash crash'

By Wayne Cole
SYDNEY, Jan 3 (Reuters) - The Japanese yen led other
safe-haven assets higher on Friday after air strikes on Baghdad
airport killed a senior Iranian military official, stoking
tensions in the Middle East and lifting the price of oil.
U.S. Treasury bonds and gold rallied after an Iraqi militia
spokesman told Reuters that Iranian Major-General Qassem
Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis were
killed in the attack. U.S. officials told Reuters that strikes had been carried
out against two targets linked to Iran in Baghdad. Oil prices
jumped $2 a barrel. O/R
The dollar eased 0.46% to 108.07 yen JPY= following the
news, breaching several layers of chart support and reaching its
lowest since early November. The euro also dipped to a
three-week low at 120.78 yen EURJPY= .
The yen is often used as a safe harbour during times of
global tensions given Japan's status as the world's largest
creditor nation. A holiday in Tokyo also made for thin
conditions, exaggerating the move.
The holiday meant cash Treasuries were not trading yet, but
Treasury bond futures gained 7 ticks on the news TYc1 implying
a drop in U.S. yields.
Against a basket of currencies, the dollar slipped 0.1% to
96.732 .DXY but stayed above the recent six-month low around
96.355.
The dollar had got a lift overnight when dismal economic
news from Europe and the UK weighed on the pound and euro.
Surveys showed British factory output fell in December at
the fastest rate since 2012, while the German manufacturing
sector stayed deep in contraction. The pound was flat at $1.3140 GBP= , after easing from a
top of $1.3266 on Thursday. The euro stood at $1.1174 EUR= ,
after backing away from major chart resistance around $1.1249.
An index of U.S. manufacturing activity due later is
expected to show a slight uptick to 49.0 in December, from 48.1
the month before.
Figures out Thursday showed jobless claims edged lower last
week in a positive signal for the U.S. labour market.
The resilience of employment is a major reason the Federal
Reserve has signalled no more rate cuts will be needed in this
cycle, leading markets to sharply scale back expectations of
further policy easing FEDWATCH .
Several Fed official are speaking on Friday including
Governor Lael Brainard and the heads of the San Francisco,
Chicago, Richmond and Dallas banks.
Analysts expect they will remain upbeat on the economic
outlook and reiterate a steady outlook for rates.
The dollar had benefited from U.S. economic outperformance
for much of 2019, though the recent easing in Sino-U.S. trade
concerns has boosted optimism that this year could favour other
major nations.
So far on Friday, there had been no repeat of the "flash
crash" of Jan. 3 last year when massive stop-loss selling swept
through an illiquid holiday-hit market.
Regulators have been on alert for any signs of strain and
trade was thin but orderly.