* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Dollar sags with benchmark US yield sliding to 21-mth low
* Sharp drop in US yields negates dollar's safe-haven status
* RBA cuts rates, Aussie steady with decision well expected
(Adds RBA policy decision, updates prices)
By Shinichi Saoshiro
TOKYO, June 4 (Reuters) - The dollar struggled to shake off
a harsh overnight session, slipping to a five-month low against
the yen on Tuesday, hurt by a sharp slide in U.S. Treasury
yields thanks to rising bets for a near-term rate cut by the
Federal Reserve.
The benchmark 10-year Treasury yield US10YT=RR fell to its
lowest level since September 2017 overnight, coming within reach
of the 2% threshold after St. Louis Federal Reserve President
James Bullard said a rate cut "may be warranted soon" given the
rising risk to economic growth posed by global trade tensions as
well as weak U.S. inflation. Treasury yields had already been on a steep decline as
investors have been piling into safe-haven government bonds in
the face of escalating trade tensions between Washington and its
trade partners.
The dollar traded down 0.1% at 107.980 yen JPY= after
brushing 107.860, its lowest since Jan. 10.
The dollar index against a basket of six major currencies
.DXY was steady at 97.153 after shedding 0.6% the previous
day.
"The dollar is even falling against currencies such as the
euro. Participants have found an incentive to finally cover euro
shorts on the sharp fall in U.S. yields," said Yukio Ishizuki,
senior currency strategist at Daiwa Securities.
"The dollar has been a safe-haven during the current 'risk
off' phase, but it's strength is waning as the unexpected pace
of the drop in U.S. yields has become too much to ignore."
The euro nudged up 0.1% to $1.1251 EUR= after rallying
roughly 0.7% overnight to $1.1262, its highest since May 13.
The single currency has drawn support from a weaker dollar
but analysts remain cautious on its longer term prospects.
"Considering the euro zone's close ties with the Chinese
economy, the euro is one of the currencies that stands to be
most affected by a Chinese economic downturn - a risk associated
with the escalating U.S.-China trade war," said Junichi
Ishikawa, senior FX strategist at IG Securities in Tokyo.
AUSSIE STEADY AFTER RBA CUTS RATES
The Australian dollar AUD=D4 held steady at $0.6974,
giving up brief gains of 0.2% to a three-week peak of $0.6975
after the nation's central bank cut rates in a widely
anticipated move.
The Reserve Bank of Australia (RBA) cut its cash rate on
Tuesday to an all-time low of 1.25% from 1.50% but it
did not give a clear indication of plans for further cuts.
The pound GBP=D4 was flat at $1.2666, having crawled off a
five-month trough of $1.2560 set on Friday thanks to the
dollar's underperformance.
Sterling had sunk to the five-month low, weighed by the
prospect of Britain choosing a eurosceptic prime minister who
could take a hard line on Brexit.
(Editing by Shri Navaratnam)