FOREX-Dollar near 2-week high on upbeat U.S. data, Treasury yield bounce

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Dollar index hovers near 2-week high
* Strong U.S. housing, employment-related data supports
greenback
* But greenback dips vs yen on lingering U.S.-China trade
woes
* US terminates Turkey's preferential trade deal, lira edges
down

(Updates moves in dollar/yen)
By Shinichi Saoshiro
TOKYO, May 17 (Reuters) - The dollar held near a two-week
high against its peers on Friday, supported by strong U.S.
economic data and a bounce in Treasury yields.
The dollar index versus a basket of six major currencies
.DXY stood little changed at 97.802 after reaching 97.882 on
Thursday, its highest since May 3.
The greenback reached the two-week peak on robust U.S.
housing data and a weekly jobless claims report which pointed to
sustained labour market strength in the world's biggest economy.
The U.S. currency also drew strength as its counterparts
such as the euro and pound were dogged by bearish factors.
"The euro is weighed down as the (euro) zone is saddled with
weak economic fundamentals and Italian political concerns, while
it's all about Brexit for the pound," said Junichi Ishikawa,
senior FX strategist at IG Securities in Tokyo.
Italy's right-wing League party will "tear apart" European
Union rules which are "strangling" the country if it scores well
in a May 23-26 European parliamentary election, Italian Deputy
Prime Minister Matteo Salvini said on Thursday. Salvini's challenge to EU fiscal rules has been a key source
of the worry for the euro, which has fallen 0.5% this week.
The safe-haven yen also stood to benefit from the woes in
Europe and elsewhere.
"Fiscal risks related to Italy is a theme sure to captivate
speculative market players. Any resulting 'risk off' could
benefit the yen not only against the euro, but against the
dollar as well," said Yukio Ishizuki, senior currency strategist
at Daiwa Securities.
The euro was steady at $1.1178 EUR= after falling to
$1.1166 overnight, its lowest since May 6.
The common currency was a touch lower at 122.67 yen
EURJPY= . It has retreated 0.5% against the yen this week,
during which it slid to 122.06, the lowest since early January.
Britain faces a potentially disorderly exit from the
European Union as Prime Minister Theresa May has struggled to
keep her Brexit deal and her premiership.
The possibility of a chaotic departure from the EU pushed
the pound to a three-month trough of $1.2783 GBP=D4 on Friday.
Sterling last traded at $1.2787, having slumped 1.6% this week.
The dollar initially extended overnight gains and popped
above 110.00 yen JPY= . But it lost some traction, last trading
at 109.735 yen, weighed down as U.S.-China trade concerns
continued to bubble in the background.
China may have no interest in continuing trade negotiations
with the United States now, Bloomberg reported on Friday,
quoting state media outlets.
Against the safe-haven yen the greenback fell to a
3-1/2-month low of 109.020 at the start of the week when a trade
war between the United States and China intensified.
China's yuan retreated to 6.9099 per dollar CNY=CFXS in
onshore trade, its weakest since late December.
The Australian dollar stretched overnight losses and fell to
a new 4-1/2-month trough of $0.6883. The Aussie suffered big
losses the previous day after soft domestic employment data
heightened expectations for an interest rate cut by the Reserve
Bank of Australia.
Elsewhere, the Turkish lira slipped 0.37% to 6.0700 per
dollar TRYTOM=D4 after the United States on Thursday
terminated Turkey's preferential trade treatment that allowed
some exports to enter the country duty free. Softening the blow
slightly, Washington halved its tariffs on Turkish steel imports
to 25% from 50%. The 10-year U.S. Treasury note US10YT=RR yielded 2.387%,
having pulled back from a near two-month low of 2.354% brushed
the previous day.

(Editing by Simon Cameron-Moore and Jacqueline Wong)