FOREX-Yen holds firm as dour data dashes appetite for risk

* Yen near 7-week high vs dollar, 3 1/2-year high vs euro
* Doubts on ECB stimulus, U.S-China spat weigh on mood
* Brazilian real, Turkish lira near record low
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, May 7 (Reuters) - The safe-haven yen hovered near a
seven-week high against the dollar on Thursday as investors
limited their exposure to riskier assets amid dire global
economic data, rising trade tensions and concerns over the euro
zone.
The yen last stood at 106.15, after rising to 105.985 per
dollar JPY= in the previous session, its firmest since
mid-March. Against the euro, it traded at 114.66 EURJPY= yen
per euro, having hit a 3 1/2-year high of 114.43 overnight.
"The yen is gaining as there are some questions over the
European Central Bank's stimulus, and as tensions between the
United States and China increase again," said Shinichiro Kadota,
senior strategist at Barclays.
Germany's highest court on Tuesday gave the European Central
Bank three months to justify purchases under its bond-buying
programme, or lose the Bundesbank's participation in one of its
main stimulus schemes. U.S. Secretary of State Mike Pompeo on Wednesday renewed his
aggressive criticism of China, as the Trump administration
weighs punitive actions against Beijing over its early handling
of the virus outbreak. President Donald Trump said on Wednesday he was closely
watching to see if China is fulfilling its obligations under a
Phase 1 trade deal the two countries signed in January before
the coronavirus spread globally. "Last month we saw an easing in risk-off trades. But such
optimism may not last long," said Shinji Ishimaru, senior
currency analyst at MUFG Bank.
"We are likely to begin to see how severe normalisation will
be after the great lockdown."
A private business survey on China, where most official
lockdowns ended more than two months ago, showed the country's
service sectory activity remained mired in contraction in April
as layoffs hit a record and export orders plunged. The Caixin/Markit services Purchasing Managers' Index (PMI)
did manage to pull up to 44.4 in April from 43 in March but was
still way below its 51-55 range before the pandemic.
In a further sign of weak consumption in China, the
country's imports dropped 14.2% from a year ago, a bigger
decline than economists' forecast of 11.2% fall. But exports rose 3.5% despite expectations of 15.7% drop,
helping to lift the Chinese yuan and the Australian dollar
slightly.
The yuan firmed about 0.1% to 7.0959 to the dollar
CNY=CFXS while the Aussie ticked up 0.25% to $0.6420 AUD=D4 .
Still, that hardly lifted the global gloom.
In the United States, private employers laid off a record
20.2 million workers in April in response to the novel
coronavirus outbreak. The staggering number, while widely anticipated since 30.3
million people had filed claims for unemployment benefits since
March 21, underscored the colossal damage to the economy.
In Europe, euro zone business activity almost ground to a
halt last month while retail sales suffered their largest
decline on record in March amid government-imposed lockdowns.
In the UK, British construction suffered its sharpest
decline on record, more than twice as large as the previous
month, even though general construction work was not ordered by
the government to stop. The euro was little changed at $1.0801 EUR= after three
straight days of falls so far this week, hit also by the German
court decision challenging the country's participation in the
European Central Bank's stimulus.
The British pound eased a tad on Thursday to $1.2322
GBP=D4 , touching its lowest level in almost two weeks.
The risk-averse mood undermined emerging market currencies,
especially those of countries that are struggling to contain the
coronavirus.
The Brazilian real dropped to 5.714 per dollar BRL= , just
a hair above its record low touched last month after rating
agency Fitch lowered the country's credit rating to negative.
Brazil's central bank slashed interest rates more than
expected on Wednesday to shore up the economy though it is
likely to undermine the real further. The currency has lost 4% so far this month, and 29.7% this
year, the worst among major emerging market currencies.
The country registered a record number of cases and deaths
on Wednesday and has had 1.5 times as many cases as China.
President Jair Bolsonaro has drawn criticism from across the
political spectrum for dismissing the threat of the virus as a
"little flu."
The Turkish lira stood at 7.2045 per dollar TRY= , close to
its all-time low of 7.24 hit during a 2018 currency crisis as
the country's depleted currency reserves added to the pressure.