FOREX-Dollar steadies as markets focus on US-China trade tensions, politics

By Gregor Stuart Hunter

SINGAPORE, Oct 13 (Reuters) - The U.S. dollar recovered from a selloff in early trade on Monday as investors hoped Washington may temper its latest escalation of the trade war with Beijing, while political developments in France and Japan undermined the euro and the yen.

The dollar index =USD, which measures the greenback's strength against a basket of six currencies, edged higher to 99.002, retracing some losses sustained after U.S. President Trump announced 100% tariffs on China.

That revived fears of Trump's Liberation Day rollout of sweeping tariffs in April, sparking a selloff in stocks and cryptocurrencies on Friday.

"Certainly it's pretty nervous out there," said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland.

"If you look at the U.S. and China stuff, it looks like Trump has done a bit of a TACO again and softened his tone," he added, referring to a trading rule of thumb that "Trump always chickens out."

Earlier in the day, Trump said: "Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment," he posted on the Truth Social network. "He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!"

Market liquidity may be affected by holidays as the U.S. observes Columbus Day/Indigenous Peoples’ Day today, while Japan is also closed to mark Health and Sports Day.

Against the yen, the dollar fetched 151.985 yen JPY=, up 0.5% as markets assessed the path ahead for new Liberal Democratic Party leader Sanae Takaichi after Komeito quit the ruling coalition on Friday, dealing a blow to her hopes to become the first female prime minister of the world's fourth largest economy.

The euro stood at $1.1609 EUR=, down 0.1%, after the French presidency announced Prime Minister Sebastien Lecornu's new cabinet line-up on Sunday, reappointing Roland Lescure, a close ally of Emmanuel Macron, as finance minister.

Cryptocurrency markets fluctuated between gains and losses after a sharp selloff on Friday, with bitcoin last trading up 0.4% at $115,486.04. Gold XAU= hit a fresh record of $4,059.30 and was last up 0.8%.

The offshore yuan traded at 7.137 yuan per dollar CNH=, tacking on 0.1% in early Asian trade.

The Australian dollar fetched $0.6513 AUD=D3, rising 0.6% in early trade, while the kiwi traded at $0.57345 NZD=D3, up 0.3% NZD=D3.

Sterling changed hands at $1.33415 GBP=D3, up 0.1% so far on the day.