FOREX-Yen stands tall as U.S. yield curve inversion stokes economic worries

* Yen benefits as US curve inversion fuels demand for safe
havens
* U.S. yields resume decline as trade optimism wilts
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, Aug 28 (Reuters) - The yen stood tall against its
peers on Wednesday, with an inversion of the U.S. yield curve
stoking recession worries and keeping the safe-haven Japanese
currency in demand.
"It remains to be seen how accurately the U.S. yield curve
inversion reflects economic conditions. But it does prompt
speculators to reduce dollar positions and increase their bets
on the yen," said Mitsuo Imaizumi, chief forex strategist at
Daiwa Securities.
The yen traded at 105.820 per dollar JPY= , holding its
gains from the previous day, when it advanced 0.35%.
The 10-year U.S. Treasury yield US10YT=RR stood at 1.484%,
staying in proximity of 1.443%, its lowest since July 2016
brushed on Monday. The 10-year Treasury yield was about 4 basis
points below the two-year yield US2YT=RR , and the gap between
the two maturities was the widest since 2007.
Takuya Kanda, general manager at Gaitame.Com Research
Institute, said markets had weathered the worst of the storm
after Washington and Beijing last week announced fresh
tit-for-tat tariffs in their trade war.
But some of the optimism generated by U.S. President Donald
Trump's comments on Monday that raised hopes that the two sides
could begin to de-escalate their tariff war has begun to fade
after China's foreign ministry dismissed U.S. suggestions that
there had been contact between the two sides. The euro was nearly flat at $1.1085 EUR= after inching
down 0.1% on Tuesday when it had managed to recoup some of the
intraday losses on hopes that a snap election in Italy could be
avoided.
The pound traded near a one-month high of $1.2310 GBP=D4
scaled overnight.
Sterling rallied on Tuesday after Britain's opposition
Labour Party leader Jeremy Corbyn said he would do everything
necessary to prevent Britain leaving the European Union without
a divorce deal. The Australian dollar AUD=D4 added to overnight losses and
slipped 0.15% to $0.6739.
The Japanese currency also extended an overnight surge
against the Australian and New Zealand dollars and held near a
28-month peak versus the euro.
The Aussie has been on the back foot since Reserve Bank of
Australia (RBA) Deputy Governor Guy Debelle said on Tuesday that
a weakening the currency was supporting the economy and that
further falls would be beneficial. The Aussie had fallen to a decade-low of $0.6677 early in
August, weighed by factors including RBA's monetary easing bias
and a bleaker economic outlook in China, Australia's largest
trading partner.

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