* Dollar's bounce fades on lingering U.S.-China trade fears
* U.S. yields resume decline as trade optimism wilts
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Shinichi Saoshiro
TOKYO, Aug 28 (Reuters) - Pressure was back on the dollar on
Wednesday, as nagging fears the Sino-U.S. trade war will drag on
and severely hurt economic growth led to yet another slide in
U.S. bond yields.
The dollar index against a basket of six major currencies
.DXY stood little changed at 98.013 after dipping 0.1%
overnight.
The greenback started on a shaky footing this week, but then
recovered as safe-haven Treasury yields bounced from multi-year
lows after U.S. President Donald Trump softened his tone against
China and predicted the two countries would be able to reach a
trade deal.
But optimism on trade negotiations wilted as China's foreign
ministry dismissed U.S. suggestions that there had been contact
between the two sides, and said it hopes Washington can stop its
wrong actions and create conditions for talks. The dollar's peers, notably the safe-haven yen, got an
additional boost as falls in long-term Treasury yields deepened
the inversion of the U.S. yield curve, a phenomenon that has
presaged several past U.S. recessions.
"The markets have pulled out of the latest round of chaos,"
said Takuya Kanda, general manager at Gaitame.Com Research
Institute, referring to the tumult in global markets at the end
of last week when Washington and Beijing announced fresh
tit-for-tat tariffs in a further escalation of their trade
dispute.
"But as the U.S. yield curve inversion shows, the markets'
economic views remain dim, and the yen ends up gathering more
buyers than sellers," Kanda said.
The 10-year U.S. Treasury yield US10YT=RR extended
declines from overnight and last stood at 1.461%, edging back
towards 1.443%, its lowest since July 2016 brushed on Monday.
The dollar was a shade weaker at 105.680 yen JPY= after
shedding 0.35 percent overnight, but still up from an
eight-month low of 104.460 hit on Monday.
The euro was flat at $1.1091 EUR= after inching down 0.1%
on Tuesday when it had managed to recoup some of the intraday
losses on hopes that a snap election in Italy could be avoided.
The pound traded near a one-month high of $1.2310 GBP=D4
scaled overnight.
Sterling rallied on Tuesday after Britain's opposition
Labour Party leader Jeremy Corbyn said he would do everything
necessary to prevent Britain leaving the European Union without
a divorce deal. The Australian dollar AUD=D4 was almost flat at $0.6751,
having lost 0.4% on Tuesday after Reserve Bank of Australia
(RBA) Deputy Governor Guy Debelle said a weakening domestic
currency was supporting the economy and that further falls would
be beneficial. The Aussie has fallen to a decade-low of $0.6677 early in
August, weighed by factors including RBA's monetary easing bias
and a bleaker economic outlook in China, Australia's largest
trading partner.