FOREX-Yen strengthens as worsening Sino-US relations back on the table

* Dollar lower against yen, flat vs euro
* Sterling resumes decline, down 0.2% vs dollar and euro
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Olga Cotaga
July 24 - The Japanese yen rose to a one-month high while
the euro's gains paused as traders waited for flash Purchasing
Managers' Index readings for July across major developed
economies.
The eurozone Markit Composite flash PMI comes at 0800 GMT.
Economists polled by Reuters expect the index to rise to 51.1
from 48.5, a sign of return to growth. British PMIs are due at
0830 GMT and the United States follows later in the day.
The euro has already enjoyed a winning streak for all of
July, rising by 3.3% above $1.16, as the European Union's
passing of a 750 billion-euro recovery fund restored confidence.
The euro was flat at $1.1598 EUR=EBS , with the U.S. dollar
losing some of its appeal as a safe haven, making room for the
Japanese yen to rise.
The yen was last up 0.6% at 106.25 JPY=EBS , its highest
since June 23, after China's foreign ministry told the U.S.
embassy early on Friday to close its consulate in the city of
Chengdu, after Washington ordered the closure of the Chinese
consulate in Houston. "Typically when we would be entering into more of a risk-
averse posture, the dollar would strengthen," said Shannon
Saccocia, CIO at Boston Private Wealth. But because the United
States has managed the coronavirus pandemic worse than Europe or
China, "it seems like there is more promise outside of the
United States.
"I think we're going to continue to see pressure on the
dollar" as expectations of a steadier return to growth diverge
between the United States and the rest of the world, Saccocia
said.
Sino-U.S. ties have deteriorated over issues ranging from
the COVD-19 pandemic, which began in China, to Beijing trade and
business practices, its territorial claims in the South China
Sea and its clamp-down on Hong Kong.
Markets have been relieved that so far China and the United
State have not abandoned their trade deal, but they are
beginning to view that as a real risk.
The Chinese yuan, a barometer of Sino-U.S. tensions, looks
set for its worst week in three months. It last was down 0.2% at
7.0276 per dollar in the offshore market CNH=EBS .
Elsewhere, the British pound fell 0.2% versus the dollar and
the euro, to $1.2721 GBP=D3 and 91.19 pence EURGBP=D3
respectively.
Focus is also on the next U.S. fiscal rescue package, which
is deadlocked in Congress with some unemployment benefits due to
expire at the end of the month.