FOREX-Yen near 7-mth peak vs dollar; Hong Kong, Argentina woes fan risk aversion

* Yen testing January high as global tensions heighten
* Hong Kong unrest, Argentina market rout add support to yen
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, Aug 13 (Reuters) - The yen traded close to a
seven-month high against the dollar on Tuesday, as unrest in
Hong Kong and gyrations in Argentina's markets heightened
investor risk aversion and fanned demand for the safe-haven
Japanese currency.
The yen was at 105.495 per dollar JPY= after brushing
105.050 overnight, its strongest since Jan. 3.
The Japanese currency, which attracts flight-to-safety flows
in times of market turmoil, has been on a solid footing this
month, supported by factors such as U.S.-China trade tensions
and the prospect of further monetary easing by the U.S. Federal
Reserve.
The currency has received a fresh boost from deepening
unrest in Hong Kong, where the international airport was closed
to flights for several hours on Monday amid ongoing
demonstrations. Surprise primary election results in Argentina,
which resulted in a rout in the country's peso currency, stocks
and bonds, have also added support. "It's the 'risk off' in the market generated by events in
Hong Kong and Argentina that is feeding demand for the yen,"
said Yukio Ishizuki, senior currency strategist at Daiwa
Securities. "Speculators are increasing their long positions on
the yen."
"There really are no signs of the yen's advance abating,"
Ishizuki added. "The next target is the yen's high reached
against the dollar early in January, but even that threshold
won't present much of an obstacle at this rate."
The Japanese currency has gained for the past four trading
days against the greenback. A move beyond 104.100 per dollar,
this year's high scaled at the start of January, would take the
yen to its highest level since November 2016.
"The shrinking spread between U.S. and Japanese yields has
thrust dollar/yen into a downtrend, despite recent bouts of
global equity market strength," said Junichi Ishikawa, senior FX
strategist at IG Securities in Tokyo.
U.S. Treasury yields have declined steadily on the back of
global economic concerns and the prospect of the Fed cutting
rates in the months ahead. The spread between U.S. and Japanese
benchmark 10-year yields has shrunk to its narrowest since
November 2016 this month as a result.
The euro EUR= dipped 0.25% to $1.1188, handing back the
previous day's modest gains.
The single currency had edged higher on Monday after Italian
bond yields pulled back from five-week highs on relief that
rating agency Fitch left the country's credit rating unchanged.
Longer-term prospects for the euro remain grim with the
European Central Bank widely expected to ease policy as early as
September and on lingering concerns towards Italy, where its
deputy prime minister and right-wing League party leader Matteo
Salvini has called for early elections.
The Australian dollar AUD=D3 crawled up 0.15% to $0.6759
as the Chinese yuan CNH= found a bit of traction after the
People's Bank of China set a midpoint rate at a fresh 11-year
low but a level that was firmer than expected.
The Aussie had lost 0.5% the previous day, slipping in
sympathy with the yuan amid little sign of progress in
U.S.-China trade relations. The Aussie is sensitive to
developments in China, Australia's largest trading partner.
Argentina's peso ARS= lost roughly 15% to 52.15 per dollar
on Monday after brushing an all-time low of 61.99. Fears of a possible return to interventionist policies, and
by extension a possible debt default, gripped the market after
conservative Argentina President Mauricio Macri lost by a much
wider-than-expected margin to the opposition in presidential
primaries. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US-Japan yield spread, dollar/yen https://tmsnrt.rs/2YHzQJz
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(Editing by Jane Wardell and Jacqueline Wong)