FOREX-Dollar struggles as U.S. yields fall, dovish BoE weighs on pound

* Dollar index nudged off 2-week highs
* U.S. yields fall as post-G20 optimism ebbs, British yields
slide
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, July 3 (Reuters) - The dollar struggled for traction
on Wednesday as fading hopes for any near-term Sino-U.S. trade
deal revived safe-haven demand and drove U.S. bond yields to
their lowest levels since late 2016.
U.S. yields also tracked a decline in their British
counterparts to 2-1/2-year lows on dovish-sounding comments from
Bank of England Governor Mark Carney, which in turn weighed on
the pound.
The dollar index .DXY against a basket of six major
currencies was a shade lower at 96.697 after pulling back from
96.875 scaled on Tuesday, its highest since June 20.
The pound was steady at $1.2592 GBP=D4 after shedding
0.35% the previous day, when it touched a two-week trough of
$1.2584.
The BoE's Carney said on Tuesday that a global trade war and
a no-deal Brexit were growing risks to Britain's economy, which
might need more help to cope with a downturn, prompting
investors to increase their bets on central bank easing.
The dollar lost 0.3% to 107.580 yen JPY= , having been
nudged off a 12-day high of 108.535 scaled at the start of the
week.
"The dollar fell below 108.00 yen again in light of BoE
Governor Carney's dovish comments, which helped depress global
bond yields," said Shinichiro Kadota, senior strategist at
Barclays in Tokyo.
"Yields declined as the BoE, up until now, was seen as the
only central bank which was not as dovish as others."
The euro was little changed at $1.1291 EUR= following a
volatile session on Tuesday, when it swung between a low of
$1.1275 and a high of $1.1322.
The common currency had received a lift after a media report
that European Central Bank policymakers are in no rush to cut
interest rates at a July policy meeting. But it later slipped
after IMF Managing Director Christine Lagarde, perceived as a
policy dove, was nominated as the next ECB president.
"It will be difficult for Lagarde to emulate the
eye-catching policy steps which (current ECB President Mario)
Draghi implemented," said Daisuke Karakama, chief market
economist at Mizuho Bank.
But the euro zone's requirements will remain the same -it
needs lower yields and a weaker currency - and the ECB is
unlikely to undergo a dramatic change in policy under Lagarde,
he added.
The Australian dollar AUD=D4 was flat at $0.6991 after
gaining about 0.4% the previous day. The Aussie had advanced
after the Reserve Bank of Australia cut interest rates but
offered a more balanced outlook. The 10-year U.S. Treasury yield US10YT=RR extended an
overnight fall and brushed 1.948%, its lowest since November
2016.
At the G20 summit in Japan last weekend, Washington and
Beijing agreed to restart trade talks after U.S. President
Donald Trump offered concessions.
But investors were wary about the chances of a resolution to
the year-long trade war between the world's two biggest
economies, especially given the recent breakdown in talks in May
and Trump's comments that any deal would have to be tilted in
favour of the United States. Sentiment was also dented by Washington's threat of tariffs
on $4 billion of additional European Union goods in a
long-running dispute over aircraft subsidies.