FOREX-Dollar gains traction as trade fears knock bounding Aussie back

* AUD, NZD touch multi-month highs before pullback
* Yen extends gains on speculation of Fed yield-curve
control
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook and Stanley White
SINGAPORE/TOKYO, June 9 (Reuters) - The dollar found some
footing on Tuesday, rising against tearaway commodity currencies
for the first time in June as investors paused to take profits.
However, a stronger yen pointed to some trepidation over the
U.S. Federal Reserve's next move at its two-day meeting starting
later in the day.
The Australian dollar AUD=D3 , which touched a 10-month top
of $0.7043 early in the Asia session, retreated 1% to $0.6948
after China's education ministry warned students to carefully
consider studying there amid tension between the trading
partners.
The kiwi NZD=D3 also pulled back after hitting a
four-and-a-half-month high on the first morning since New
Zealand ended all social restrictions - save for its closed
borders - after the nation declared it was free of the
coronavirus. That has the Antipodean pair snapping nearly two weeks of
gains that had propelled them some 4% or more higher this month.
"There is discomfort that the glass has gone from half-full
to overflowing," DBS Bank analysts said in a note. "If
dollar/yen returns lower into 106-108...it could herald some
hiccups in the seemingly unstoppable risk rally."
The yen JPY= sat on the edge of that range at 107.97 per
dollar, gaining as investors weighed the possibility of
stepped-up bond buying - or even simply a very dovish outlook -
from the Fed.
"Japanese names have been very active since Monday in
dollar/yen, trying to trade off the chance of some kind of
yield-curve control from the Fed," said Yukio Ishizuki, foreign
exchange strategist at Daiwa Securities in Tokyo.
"I personally don't think yield curve control is necessary
now, but the dollar is under clear selling pressure."
Elsewhere the Chinese yuan CNH=D3 gave back its overnight
gains, while other moves were mostly held in check as markets
wait for the outcome of the Fed Meeting.
The pound GBP= edged up to a three-month high before
retreating to $1.2700. The euro EUR= last sat steady at
$1.1272.
A statement from the Fed is due at 1800 GMT on Wednesday
followed by a news conference half an hour later.
It is not expected to change interest rate settings though
in recent days futures pricing shows investors have abandoned
expectations of rates dipping below zero next year. UP DOWN UNDER
The latest round of exuberance, which continues to drive
stock markets higher, was last week's U.S. jobs data for May.
An increase in employment caught markets completely by
surprise and together with a smaller-than-expected fall in
Chinese exports last month, have pushed the trade-sensitive
Aussie and kiwi to milestone highs.
Even after dipping on Tuesday, he kiwi is up 5% on the
dollar this month and the Aussie 4%.
"Economies are smashed, but not smashed as badly as was
expected, and I think that's the key to this whole rally," said
Westpac FX analyst Imre Speizer in Auckland.
"The latest high-frequency data shows you that the recovery
probably looking more like a V. It's a relief rally, relief that
it's not as bad as feared."
In New Zealand, an ANZ survey of traffic movement - seen as
a forward indicator of economic growth - saw a sharp rebound in
heavy vehicle traffic last month.
The virus also appears to be in retreat in Australia where
re-opening is gathering pace, prompting RBC Capital Markets to
make a modest improvement in its 2020 GDP forecast on Monday
lifting it to better than -4% from -4.5%.
The World Health Organization on Monday warned that the
COVID-19 pandemic is "far from over," as a record number of new
daily infections were reported.
But investors took comfort from cases trending lower in the
United States and falling to a fresh low in New York, even as
testing has ramped up. "If we continue to trend lower ... this will go a long way
in re-aligning consumer risk assessment about the virus," said
RBC Capital Markets' Chief U.S. Economist, Tom Porcelli.


(Editing by Shri Navaratnam, Jacqueline Wong and Kim Coghill)