* Yen, Swiss franc fall from multi-month highs
* Euro pushed lower on dlr strength, eyes on inflation data
* China's yuan surges as traders look past Iran tensions
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
LONDON, Jan 7 (Reuters) - The Japanese yen and Swiss franc
pulled back from recent highs on Tuesday as investors became
less anxious about the chances of an all-out conflict between
the United States and Iran.
The yen fell from a three-month high versus the dollar,
although sentiment remains fragile due to continued worries
about armed conflict between the U.S. and Iran.
A drone strike in Baghdad on Friday ordered by U.S.
President Donald Trump killed Iranian military commander Qassem
Soleimani, widely seen as Iran's second most powerful figure
behind Supreme Leader Ayatollah Ali Khamenei.
The Swiss franc, another go-to currency when investors are
nervous, fell from four-month highs against the euro and dropped
versus the dollar.
Equity markets, which weakened heavily on Monday, rebounded
in early trading.
"Since no further bad news from the Middle East followed,
markets have calmed down somewhat and panic moves like in the
USD or the JPY have been corrected," Commerzbank analysts said.
The yen was last at 108.33 yen per dollar, some way from its
high on Monday of 107.77 JPY=EBS .
The Swiss franc weakened 0.2% versus the dollar to $0.9696
CHF=EBS and stood at 1.0839 francs per euro EURCHF=EBS ,
unchanged on the day.
The dollar, which fell on Monday, rose 0.2% against the euro
to $1.1176 EUR=EBS .
The U.S. currency, the world's most liquid, is often bought
in times of market flux, but its performance has been mixed in
recent sessions - slightly better-than-expected euro zone
business survey data on Monday supported the euro.
Against a basket of currencies the dollar index firmed 0.1%
to 96.772 .DXY .
"Sentiment clearly favours risk-off trades, but dollar/yen
is not falling much because Japanese importers are buying," said
Yukio Ishizuki, strategist at Daiwa Securities in Tokyo.
"Excluding this real demand, the dollar is weak against
other currencies. This reflects the situation in the Mid-East,
but we need to see what happens next."
Aside from geopolitical tensions, the focus for currencies
in European hours is December euro zone flash inflation data,
due at 1000 GMT.
U.S. trade balance data, factory orders, and numbers from
the services sector are also due later.
Elsewhere, sterling slipped 0.2% to $1.3144 GBP=D3 ahead
of the UK parliament returning following the Christmas recess.
The onshore yuan CNY=CFXS rose to a five-month high of
6.9522 per dollar in another sign that traders are ready to put
aside concerns about a more significant confrontation between
Tehran and Washington.
The offshore yuan gained 0.4% to 6.9393 yuan per dollar
CNH=EBS , its highest since Dec. 13.
The U.S. and China are expected to sign a preliminary deal
on Jan. 15 to de-escalate a prolonged trade war.
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