FOREX-Mexican peso slides, yen gains as Trump shakes markets with new tariffs

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Trump to impose tariffs on all goods coming from Mexico
* Mexican peso slides to 3-month low vs dollar in reaction
* Safe-haven yen bought as global trade concerns escalate

(Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, May 31 (Reuters) - The Mexican peso sank to
three-month lows against the dollar on Friday after Washington
unexpectedly said it will slap tariffs on all goods coming from
its southern neighbour.
The safe-haven yen advanced as the Trump administration's
move to escalate its trade war with other countries shook
already fragile investor sentiment in global financial markets.
"The news on Mexican tariffs came just as the United States
is imposing tariffs on China, and the timing is stirring up the
markets," said Daisuke Karakama, chief market economist at
Mizuho Bank.
"Headlines related to trade issues come in short,
unpredictable bursts. Currency market reaction is therefore
quite intense, but also tends to be short-lived."
The Mexican peso MXN=D4 was down 1.8% at 19.4812 per
dollar after President Donald Trump said on Thursday the United
States will impose a 5% tariff on all goods coming from Mexico
from June 10 until illegal immigration is stopped. At one point, the peso weakened to 19.5950 per dollar, its
lowest since March 8.
"Imposing these tariffs is in principle, not allowed under
the free trade agreement currently in place between Mexico and
the United States or under WTO general frameworks," wrote Tania
Escobedo, strategist at RBC Capital Markets.
"It is likely, however, that Trump will claim the measure is
a matter of national security, referring to the International
Emergency Economic Powers Act (IEEPA)."
The yen was up 0.35% at 109.240 per dollar JPY= and also
made gains against the euro and Australian dollar.
The dollar index against a basket of six major currencies
.DXY was flat at 98.106 after inching down the previous day,
when it snapped two straight sessions of gains amid a continuing
decline in U.S. yields.
The index was still headed for a 0.5% gain this week,
supported by weakness in peers such as the euro and sterling,
and the U.S. currency's own status as a safe-haven in times of
market and economic troubles.
"The dollar's recent gains are part of the flight-to-quality
into the United States, notably the strong investor demand for
Treasuries which has driven their yields lower," said Takuya
Kanda, general manager at Gaitame.Com Research Institute.
The 10-year U.S. Treasury note yield US10YT=RR has
declined steadily this week and touched 2.171% on Friday, its
lowest since September 2017.
The euro was steady at $1.1133 EUR= . The single currency
was down 0.62% this week, weighed by factors including concerns
over Italy's rising debt and the prospect of Trump opening up a
European front in his trade war.
The pound was effectively flat at $1.2612 GBP=D4 . Sterling
has lost nearly 0.8% this week, as the imminent departure of
Theresa May as prime minister deepened fears about a chaotic
exit for Britain from the European Union. The Swiss franc CHF= , which serves as refuge in times of
market turmoil, rose 0.2% to 1.0058 francs per dollar.

(Editing by Shri Navaratnam and Sam Holmes)