REFILE-FOREX-New U.S.-China tensions lift dollar; euro, offshore yuan fall

(Fixes headline to say 'lift' not 'lifts')
* U.S.-China tensions lift dollar
* Oil price falls hit commodity currencies
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Elizabeth Howcroft
LONDON, May 22 (Reuters) - The dollar climbed on Friday as
the emergence of a fresh source of tension between the United
States and China boosted demand for safe-haven currencies and
caused the euro, offshore yuan, and commodity currencies to
fall.
The dollar, which extended its overnight gains in London
trading, rose after U.S. President Donald Trump said that
Washington would react "very strongly" to a new Chinese security
law on Hong Kong that could also lead to new pro-democracy
protests. Sino-American relations have worsened during the coronavirus
pandemic. The U.S. has ramped up its criticism of China, blaming
it for the spread of the virus, which originated in the city of
Wuhan in central China.
Last week, the U.S. government moved to block global chip
supplies to blacklisted telecoms equipment maker Huawei
Technologies HWT.UL . The U.S. Senate also passed legislation
that could prevent some Chinese companies from listing their
shares on U.S. exchanges. "Currently currencies are reflecting the risk-off scenario
and that, for today anyway, explains why the dollar is higher,"
said Neil Jones, head of FX Sales at Mizuho Bank.
"I think it will continue to go higher today and weigh on
currencies like the euro and the pound, and the offshore yuan,"
he added.
Jones said that the U.S.-China tensions look set to continue
for now but that he is cautiously optimistic that a trade deal
between the two countries will be reached, since it is in
everyone's interest.
Against a basket of comparable currencies =USD , the dollar
was last at 99.750, up 0.3% since New York's close. After two
consecutive weeks of gains, the dollar looks set to end this
week down around 0.6%.
The euro was down around 0.4% against the dollar, at
$1.0904, having retreated from the three-week high of $1.1008 it
touched on Thursday EUR=EBS .
Mizuho's Jones said that the euro failing to hold around the
key $1.10 level may have made some market participants turn more
bearish or sell euro longs, and that the dollar's strength is
also a factor weakening the euro.
The offshore Chinese yuan hit a two-month low of 7.1644
versus the dollar in early London trading CNH=EBS . Its weakest
point during the peak of the coronavirus crisis at the end of
March was 7.1651.
The onshore yuan hit eight-month lows.
Commodity currencies fell as investors sought safety, with
the riskier Australian dollar down 0.5% AUD=D3 and the New
Zealand dollar down 0.4% NZD=D3 , against the U.S. dollar.
Oil prices fell on Friday after China failed to set an
economic growth target for 2020, sparking concern that the
coronavirus pandemic will cap fuel demand in the world's
second-largest oil user. "The fall in the oil price weighed on NOK overnight, making
it the worst performing European currency (even underperforming
RUB)," wrote ING strategists in a note to clients.
But, they added, the fall in Brent oil is a correction
rather than the start of a new trend, and the Norges Bank is
finished cutting interest rates, so the outlook is positive for
the Norwegian crown for the second half of 2020.
The Norwegian crown was last down around 1.1% against the
U.S. dollar NOK=D3 and 0.6% against the euro EURNOK=D3 , its
weakest in five days.