FOREX-Safe-haven currencies give back gains as U.S.-Iran situation eases

* Japanese yen falls to 1-1/2-week low
* Dollar, Swiss franc down as well
* Chinese yuan rises to 5-month high vs dollar
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga
LONDON, Jan 9 (Reuters) - Safe-haven currencies such as the
Japanese yen retreated on Thursday as the United States and Iran
backed away from further conflict, with markets flipping back to
a more risk-taking approach on hopes of a U.S.-China trade deal.
U.S. President Donald Trump responded overnight to an
Iranian attack on U.S. forces with sanctions, not violence. Iran
offered no immediate signal it would retaliate further to a Jan.
3 U.S. strike that killed one of its most senior military
commanders. The yen, seen as a safe haven in times of geopolitical
turmoil because of its deep liquidity and Japan's current
account surplus, quickly reversed its gains made after
Wednesday's missile strike.
It was last down 0.2% at 109.36, a 1-1/2-week low JPY=EBS .
"Markets are brushing aside fears of a major escalation in
U.S./Iranian conflict," said Societe Generale's strategist Kit
Juckes. "The Japanese yen is the biggest FX loser."
The dollar, also seen as a safe choice to park money in
times of turmoil, fell against other major currencies.
The greenback was down 0.1% versus the euro as euro/dollar
traded at $1.1115 EUR=EBS and by the same magnitude versus the
pound, last trading at $1.3112 GBP=D3 .
The euro was also rising against the Swiss franc, another
safe-haven, by 0.2% to 1.0833 EURCHF=EBS .
Traders' focus is expected to shift back to the global
economy, with expectations that the United States and China will
sign a trade deal next week providing underlying support for
risk assets.
Investors think the deal will clear one of the world
economy's biggest uncertainties and help boost global growth
this year, although some think that view is too optimistic.
China's yuan rose to a five-month high of 6.9175 against the
dollar overnight in the offshore market CNH=EBS , boosted also
by a steady inflation readout.
Moreover, Chinese factory-gate prices fell at a slower pace
in December, giving Beijing room to stay on course on monetary
easing as economic growth cools. Some investors have worried
that consumer inflation, hovering near eight-year highs, could
make China's central bank more cautious about further stimulus.
"A trade deal, falling inflation ... combined with past and
current PBOC easing should over the next few months help the
Chinese economy," said Sebastien Galy, a Nordea strategist.
Traders will be watching the euro zone November unemployment
rate, expected to stay at 7.5%, and U.S. jobless claims, which
economists polled by Reuters expect to have inched down to
220,000 in the week to Jan. 4 from 222,000 in the comparable
period.
The jobless claims should give an indication of how healthy
the U.S. job market is ahead of the more closely watched
non-farm payrolls data due out on Friday.