* Euro bounces slightly after shedding nearly 0.3% overnight
* U.S. 10-yr Treasury yields at the lowest since Sept. 2017
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Daniel Leussink
TOKYO, May 29 (Reuters) - The dollar managed to hold on to
most of its overnight gains on Wednesday after investors scooped
up safe-haven assets, including U.S. Treasuries, on lingering
fears of a further escalation in the Sino-U.S. trade dispute.
Losses in the euro in the previous session also helped
support the dollar, as analysts warned of more risks for the
single currency on uncertainty surrounding the euro zone economy
and the bloc's political future.
"It looks like there has been a real surge in U.S.
Treasuries," said Nick Twidale, chief operating officer at
Rakuten Securities Australia in Sydney.
"We're probably going to see some catch-up in the foreign
exchange market over the next few sessions," Twidale said,
adding that he expected safe-haven currencies such as the
Japanese yen and the Swiss franc to be in demand.
Against a basket of six peers, the dollar was down less than
0.1% at 97.897 .DXY , having ended up 0.3% overnight. The index
was trading about 0.5% off a two-year high of 98.371 hit on
Thursday and is still up 1.8% for the year.
The dollar held mostly steady even after benchmark 10-year
U.S. Treasury yields US10YT=RR hit as low as 2.243%, their
lowest since September 2017. The greenback's own status as a
safe-haven helped amid worries about the trade tensions and
Italy's budget policy. The U.S. 10-year yields were last at
2.253%. The euro EUR= edged up 0.1% to $1.1167, bouncing slightly
after shedding nearly 0.3% during the previous session. The
common currency remained not far off a near two-year low of
$1.11055 brushed on Thursday.
European Union leaders are set to begin the process of
filling a number of top EU posts, from the head of the European
Commission to the European Central Bank. "The reason we've seen the euro drop off is because the
European zone in particular has been threatened by and troubled
by the trade concerns," said Rakuten's Twidale.
"On the back of that, we also had those European elections
so there's a lot of political instability in Europe," he added.
"That's putting pressure on the currency."
Italian Deputy Prime Minister Matteo Salvini, whose
far-right League triumphed in European elections on Sunday, said
the European Commission could fine Italy 3 billion euros for
breaking EU debt and deficit rules, a comment that weighed on
the single currency. The yen JPY= was 0.15% stronger at 109.22 per dollar on
the lower U.S. yields and after U.S. President Donald Trump said
on Monday he expected Japan and the United States to announce a
trade agreement "probably in August."
The yen, which tends to draw steady support from a
flight-to-safety bid during geopolitical or financial stress as
Japan is the world's biggest creditor nation, remained just 0.2%
above a three-month high of 109.02 yen touched on May 13.
The Australian dollar AUD=D4 inched up to $0.6929, about
0.9% off a recent trough of $0.6865.
(Editing by Shri Navaratnam)