FOREX-Dollar falls versus yen as sentiment remains fragile on trade worries

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Tussle over China currency policy rattles markets
* Markets calm but sentiment remains fragile
* Kiwi in focus before RBNZ meeting

By Stanley White
TOKYO, Aug 7 (Reuters) - The dollar fell against the yen as
Japanese stocks opened lower on Wednesday in a sign markets
remain nervous about U.S.-China trade frictions following major
foreign exchange volatility in the previous session.
Traders await China's central bank fixing for the onshore
yuan later on Wednesday and currencies are expected to remain
stable, provided there is no fresh exchange of policy or
rhetorical shots between Beijing and Washington.
The world's two-largest economies are locked in an intense
trade dispute that rapidly escalated late last week when U.S.
President Donald Trump said he would impose more tariffs on
Chinese goods.
Any rapid deterioration in sentiment would support the
safe-haven yen and hasten yuan declines as there appears to be
no quick resolution to China and the United States' trade
dispute, which escalated earlier this week when Washington
branded Beijing a currency manipulator.
"Escalation of U.S.-China trade frictions has deteriorated
market sentiment, which will eventually make Treasury yields go
lower and the yen go higher," said Tohru Sasaki, head of Japan
markets research at JP Morgan Securities in Tokyo.
"We still expect the dollar to rise to 7.35 yuan by the end
of the year, which will make the U.S. administration very
uncomfortable. I expect the dollar to fall to 104-103 yen by the
end of the year."
The dollar fell 0.3% to 106.16 yen JPY=EBS in early Asian
trading. On Tuesday, the dollar rallied from a low of 105.51 yen
to as high as 107.07 yen in a volatile session sparked by
worries about China's currency policy.
Revived concerns about trade frictions tend to push demand
for the safe-haven yen higher.
The offshore yuan CNH=D3 was unchanged at 7.0531 per
dollar, holding on to gains after rallying from 7.1397, the
lowest since international trading in the currency began in
2010.
The dollar index =USD , which measures the greenback
against six major currencies, rose 0.37% to 97.581.
The euro stood at $1.1202 EUR=EBS , flat so far in Asian
trading.
Elsewhere in currency markets, the New Zealand dollar
NZD=D3 was little changed at $0.6528 before a Reserve Bank of
New Zealand meeting.
The RBNZ is expected to cut interest rates to a record low
of 1.25% on Wednesday, but strong unemployment data released on
Tuesday suggests the economy may not be as bad as some had
speculated.