FOREX-Dollar falls versus yen, offshore yuan slips on trade woes

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Tussle over China currency policy rattles markets
* Markets calm but sentiment remains fragile
* Kiwi falls after RBNZ cuts rates more than expected

(Adds details on yuan midpoint, intervention in forwards, RBNZ)
By Stanley White
TOKYO, Aug 7 (Reuters) - The dollar fell against the yen and
the yuan weakened, in a sign investors remain wary that China's
currency policy has become a new flashpoint in its trade war
with the United States.
The yuan eased against the dollar in offshore trade on
Wednesday after the People's Bank of China set its official
midpoint not much firmer than its previous close.
China's currency also opened weaker against the dollar in
onshore trade.
The world's two-largest economies are locked in a bitter
trade dispute that rapidly escalated late last week when U.S.
President Donald Trump said he would impose more tariffs on
Chinese goods.
China responded on Monday by allowing its currency to weaken
past the psychologically important line of 7 per dollar, which
immediately prompted Washington to label Beijing a currency
manipulator.
Market sentiment has deteriorated rapidly as a result, which
would support the safe-haven yen and hasten yuan declines as
there appears to be no quick resolution to the U.S.-Sino
conflict.
Risk sentiment took a further hit after the Reserve Bank of
New Zealand stunned traders by cutting interest rates more than
expected, highlighting the growing concern policymakers have
about the global economy.
"Escalation of U.S.-China trade frictions has deteriorated
market sentiment, which will eventually make Treasury yields go
lower and the yen go higher," said Tohru Sasaki, head of Japan
markets research at JP Morgan Securities in Tokyo.
"We still expect the dollar to rise to 7.35 yuan by the end
of the year, which will make the U.S. administration very
uncomfortable. I expect the dollar to fall to 104-103 yen by the
end of the year."
The dollar fell 0.3% to 106.13 yen JPY=EBS in Asian
trading. On Tuesday, the greenback rallied from a low of 105.51
yen to as high as 107.07 yen in a volatile session sparked by
worries about China's currency policy.
Revived concerns about trade frictions tend to push demand
for the safe-haven yen higher.
The offshore yuan CNH=D3 fell to 7.0701 per dollar, not
far from 7.1397, the lowest since international trading in the
currency began in 2010.
The onshore yuan CNY=CFXS opened trade at 7.0369 per
dollar versus its last close at 7.0250.
China's state banks have been active in the onshore yuan
forwards market this week, using swaps to decrease the supply of
dollars, four sources with knowledge of the matter told Reuters.
The moves by state banks help reduce the supply of dollars
that the market can access to short-sell the yuan.
The dollar index =USD , which measures the greenback
against six major currencies, was little changed on Wednesday at
97.474.
U.S. President Donald Trump dismissed fears of a protracted
trade war with China on Tuesday, but Beijing has sent strong
warnings that labelling it a currency manipulator would have
severe consequences for the global financial order. Spot gold XAU= , which is usually bought in times of
economic uncertainty because of its safe-haven status, rose 1%
to $1,488.99 an ounce.
Prices on 10-year U.S. Treasuries, another safe asset, also
rose in Asia, pushing yields down to 1.6888%, close to the
lowest in almost three years.
The euro stood at $1.1202 EUR=EBS , flat so far in Asian
trading.
Elsewhere in currency markets, the New Zealand dollar
NZD=D3 erased gains to trade 0.7% lower at $0.6471 after the
Reserve Bank of New Zealand cut interest rates by 50 basis
points to a record low of 1.00%, confounding expectations for a
smaller 25 basis point rate cut.