CORRECTED-FOREX-Dollar set for 4th consecutive monthly rise on trade tensions

(Corrects para 2 to say markets pricing rate cuts, not hikes)
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, May 30 (Reuters) - The dollar edged towards a
one-week high on Thursday as the trade tensions between China
and the United States prompted investors to seek shelter in the
greenback.
While U.S. money markets are pricing in roughly two rate
cuts by January 2020 and the bond yield curve inverted further
overnight, signalling rising recessionary risks for the world's
biggest economy, demand for dollars show no signs of abating.
"The strength in the dollar is surprising given that markets
are now expecting multiple rate cuts by 2020," Commerzbank FX
strategist Ulrich Leuchtmann said.
Against a basket of its rivals .DXY , the dollar was
generally firm at 98.22, with gains more pronounced against
rivals such as the euro and the pound. It was on track to rise
for a fourth consecutive month.
Risk appetite was broadly cautious despite some early gains
in European stocks, with bond yields firmly entrenched in
recession warning territory.
A senior Chinese diplomat said on Thursday provoking trade
disputes was "naked economic terrorism", ramping up the rhetoric
against the United States amid a bitter trade war shows no signs
of ending soon.
The spread between three month U.S. Treasury bills and
10-year bond yields has inverted to its lowest level since
August 2017. An inverted yield curve is traditionally seen as a
harbinger of recession by financial markets.
Elsewhere in the foreign exchange market, the dollar was
steady at 109.59 yen JPY= , about 0.5% above a more than
three-month low of 109.02 yen touched on May 13.
Analysts said the yen, another safe-haven asset backed by
Japan's status as the world's biggest creditor nation, remained
relatively weak due to domestic investors' demand for dollars.
"As there's persistent yen-selling and dollar-buying from
Japanese investors when the rate approaches the 109.10 yen per
dollar level, it's not easy for the yen to rise above the 109
level," said Yukio Ishizuki, senior currency strategist at Daiwa
Securities.