FOREX-Yen jumps, yuan slumps after Trump breaks truce in China trade war

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Trump says to impose more tariffs on China
* U.S.-China trade war could cause more market volatility
* Yen jumps versus Aussie, kiwi

(Adds onshore yuan, pound, strategist's quote)
By Stanley White
TOKYO, Aug 2 (Reuters) - The Japanese yen surged to a
five-week high versus the dollar and a 2-1/2-year peak against
the pound on Friday, after U.S. President Donald Trump broke a
truce in the Sino-U.S. trade war, bolstering demand for
safe-havens.
Trump said he would impose an additional 10% tariff on $300
billion worth of Chinese imports on Sept. 1 after U.S.
negotiators returned from trade talks in Shanghai, saying China
had failed to buy large quantities of U.S. agricultural products
as promised. China's onshore yuan slumped to its lowest since November
2018 as Trump's new levies would end a recent pause in a trade
war that has forced Chinese policymakers to unleash stimulus to
offset its slowing economy.
The British pound edged toward a 30-month low versus the
dollar due to persistent worries about a no-deal Brexit and a
cut in the Bank of England's economic forecasts.
Trump's surprise announcement sent shockwaves through global
financial markets and wiped out the dollar's recent rally
against the yen, made after U.S. Federal Reserve Chairman Jerome
Powell indicated the central bank was not entering a prolonged
easing cycle.
An escalation in trade friction between the world's
two-largest economies threatens to bring further volatility to
stocks and bond yields, which could weigh on the dollar and
currencies from commodities exporters that trade with China.
"There was a speculative move to test the dollar/yen's
downside, but it ran into a lot of real-demand bids," said Yukio
Ishizuki, foreign exchange strategist at Daiwa Securities in
Tokyo.
"Yen buying still has further room to run, especially
against the crosses. Trump has given us plenty of reason to move
to risk-off trades. The trade war will be in focus for some time
to come."
Against the dollar, the yen JPY=EBS jumped to 106.84, its
strongest since June 25, before paring gains to trade at 107.06.
For the week the dollar was on course for a 1.5% decline
versus the yen, its largest weekly decline since January.
The Chinese yuan slid over 0.7% to 6.95 per dollar in
onshore trade CNY=CFXS and fell to 6.9756 in the offshore
market CNH=D3 .
The dollar index .DXY was steady in Asia at 98.417 after
falling 0.15% on Thursday, its biggest daily decline in two
weeks.
The benchmark 10-year U.S. Treasury yield US10YT=RR
dropped to 1.8750% in Asian trading, its lowest since November
2016 and the first time it has fallen below the technically
significant 2% level in more than two years.
Falling Treasury yields initially put pressure on the dollar
against the yen, but the yen then started to race higher against
other currencies as the yuan fell and Chinese stocks weakened,
analysts said.
Against the pound, the yen GBPJPY= surged to 129.34,
highest since November 2016, to then settle at 129.52.
Against the Australian dollar, the yen AUDJPY= rose to
72.66, the highest since October 2011, before trading at 72.84.
Versus the New Zealand dollar, the yen NZDJPY= jumped to
69.97, the highest in more than six years.
The pound GBP= , battered by the increasing likelihood that
Britain will exit the European Union without a deal, came off a
30-month low, but had not turned positive in afternoon trade. It
was last 0.2% lower on the day at $1.2103.
Sterling is down 2.3% this week, its biggest weekly decline
since October 2017.
Later on Friday U.S. nonfarm payrolls for July are expected
to show 164,000 new jobs were created, less than 224,000 new
jobs created in the previous month.
Under normal circumstances, the nonfarm payrolls data would
command traders' attention, but it risks being drowned out as
investors track the impact of Trump's decision to impose more
tariffs on Chinese goods.

(Editing by Sam Holmes and Jacqueline Wong)