FOREX-Risk currencies recover after Navarro walks back China comments

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, June 23 (Reuters) - The Australian dollar and other
risk-sensitive currencies bounced back from sharp falls on
Tuesday after White House trade adviser Peter Navarro said his
comments that the trade deal with China was "over" were taken
out of context.
U.S. President Donald Trump also chimed in, saying the Phase
1 trade deal struck with China in January was fully intact,
quelling market concerns that Washington may be ditching the
agreement. The Australian dollar, which had fallen as much as 0.7%,
turned positive on the day to last stand at $0.6922 AUD=D4 .
The offshore Chinese yuan pared much of its earlier losses
to trade at 7.068 per dollar CNH= , down about 0.15% from late
U.S. levels.
The safe-haven yen JPY= dropped 0.25% to 107.16 to the
dollar.
"The market swings underscore how much the market is worried
about possible deteriorations in U.S.-China relations," said
Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
The world's two largest economies, long mired in acrimony
over trade, have clashed recently over the handling of the
coronavirus pandemic and Beijing's plans to introduce a new
security law in Hong Kong.
The wild swings in currencies come as the market is also
torn between hopes of economic re-openings in many parts of the
world and signs coronavirus infections are rising in the United
States.
Market sentiment was generally positive this week as some
big cities in North America, such as New York and Toronto, eased
lockdowns and reopened their economies.
"From spring, the market has been bolstered by the Federal
Reserve's easing and hopes of an economic recovery from the
pandemic. But that may have run its course amid rising
infections in the U.S. since the middle of this month," said
Masashi Hashimoto, senior economist at the Institute for
International Monetary Affairs.
"We now have to see how much the economy will recover. The
longer it takes to recover, job losses will become permanent and
the problems will become more structural."
That is the problem many countries around the world are
facing as the virus continues to spread.
The World Health Organization (WHO) reported a record
increase in global novel coronavirus cases on Sunday, with
spikes in infections in southern and western U.S. states as well
as Brazil.
In Europe, where re-opening began as early as late April in
some countries, business activity surveys due later on Tuesday
will be closely watched for clues on the pace of recovery.
Economists expect the euro zone composite flash PMI to rise
to 42.4 in June from 31.9 last month as European economies
gradually reopen.
Ahead of the data, the euro traded slightly firmer at
$1.1274 EUR= , extending its rebound from Monday's low of
$1.1168.

(Editing by Sam Holmes and Jacqueline Wong)