FOREX-Trade jitters boost yen, euro shrugs off Italian election scenario

* Yen rises back below 106 as investors look for safety
* Euro gains despite Italian political uncertainty
* Dollar headed for biggest weekly decline since June
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, Aug 9 (Reuters) - The yen rose on Friday as
U.S.-China trade conflict jitters encouraged demand for
safe-haven currencies, while the euro shrugged off a breakdown
in Italy's governing coalition and the prospect of new
elections.
After a tumultuous few days dominated by investor concerns
about the escalating tariff war between Beijing and Washington,
markets looked to be ending the week on a calmer note.
The Chinese yuan rose slightly, taking it further away from
lows hit on Monday when Beijing shocked markets by allowing the
currency to weaken past 7 to the dollar.
"Markets have calmed down now that the renminbi has
stabilised," said Thu Lan Nguyen, a strategist at Commerzbank in
Frankfurt. "But dollar/yen and euro/Swiss franc are still near
their recent highs."
The yen rose 0.2% to 105.9 yen per dollar JPY=EBS . It was
on course for its second weekly gain versus the greenback and
its third weekly gain versus the Australian and New Zealand
dollars.
"In terms of positioning, some speculators are a little too
long in the yen, but I think many people feel comfortable
remaining short dollar and long yen," said Yukio Ishizuki,
foreign exchange strategist at Daiwa Securities in Tokyo.
The Swiss franc, another currency popular with investors in
times of economic uncertainty, was unchanged but had earlier
strengthened past 1.09 francs per euro EURCHF=EBS .
The euro rose 0.2% to $1.1197, showing little reaction to
news that the Italian government was on the brink of collapse
after League leader Matteo Salvini said his coalition with the
5-Star Movement was untenable and called for early elections.
"We still have markets in a risk-off mood which is actually
supporting the euro. This is overshadowing these idiosyncratic
political issues we have in the euro zone," Commerzbank's Nguyen
said.
The euro has done particularly well against the Swedish
crown and eastern European currencies this week, she noted.
The dollar index =USD , which measures it against a basket
of six major currencies, slipped slightly to 97.545 .DXY and
remained on course for its biggest weekly decline since June 21.
The New Zealand dollar rose slightly to $0.6485 NZD=D3 but
was headed for its third weekly decline. The kiwi has slumped to
its lowest in more than three years this week after the central
bank on Wednesday surprised traders by cutting interest rates
more than expected and hinting at taking rates into negative
territory.
Sterling edged lower to $1.2122 GBP=D3 and was also down
against the euro at 92.26 pence versus the euro EURGBP=D3 .