Dollar falls vs yen amid growing worry of wider trade fights

By Tomo Uetake

TOKYO (Reuters) - The dollar slipped against the yen in Asian trade on Tuesday, hovering near a two-week low, as worries about an intensifying fight between the United States and its trade partners continued to slash risk appetites.

Markets were buffeted by mixed messages from Washington on its international trade stance.

U.S. Treasury Secretary Steven Mnuchin said on Monday that coming investment restrictions from the department will not be specific to China but would apply "to all countries that are trying to steal our technology."

However, that statement was contradicted by White House trade and manufacturing adviser Peter Navarro, who said that any investment restrictions proposed by the Trump administration would target China and not other countries.

Although the dollar briefly pared some of its losses after Navarro's comments, it slipped back to 109.43 yen, down 0.3 percent on the day and near the two-week low of 109.365 touched on Monday.

"It looks like there are still several different opinions within the White House on proposed restrictions on foreign investment," said Tohru Sasaki, head of market research at JPMorgan Chase Bank in Tokyo.

"I think stock and currency markets are likely to stay nervous to trade-related headlines until July 6, when the Trump administration will announce its next moves on China."

The news added to the sense of caution felt after Trump on Friday threatened to impose a 20 percent tariff on cars imported from the European Union. The EU said it would be forced to retaliate.

The dollar index, which measures the greenback against a basket of six major currencies, stood at 94.191, moving further from its 11-month high of 95.533 hit on June 21.

The trade dispute between the United States and China knocked offshore yuan to 6.5640 per dollar, its weakest in nearly six months.

The euro edged up 0.1 percent in Asian trade to $1.1717, extending its recovery from its 11-month low of $1.1508 touched on Thursday.

The euro's gains came after it strengthened on Friday following improved regional economic growth data and new assurances by Italian politicians that their nation would not leave the single currency.

Still, the single currency remains vulnerable to regional political instability as German Chancellor Angela Merkel faces pressure to deal with the migration dispute that has divided Europe and threatened her own government.

"The ongoing political angst in Europe also has contributed to risk-off market sentiment," said Kengo Suzuki, chief forex strategist at Mizuho Securities.

The commodity-linked Australian, New Zealand and Canadian dollars were steady to slightly softer, as a surge in crude oil prices ran out of steam and copper prices sagged.

(Reporting by Tomo Uetake; Editing by Shri Navaratnam and Richard Borsuk)