FOREX-Yen up on Mexico tariff fears as investors await ECB

* U.S., Mexico unable to reach agreement on tariffs, yen
edges up
* Immediate market focus on ECB policy decision later on
Thursday
* Already wobbly Mexican peso hit as Fitch cuts credit
rating
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Finn
LONDON, June 6 (Reuters) - Japan's yen approached a
five-month high on Thursday after a lack of progress in
U.S.-Mexico trade talks hurt risk sentiment and drove investors
towards safe-haven currencies.
Investors were focused on the euro, which has strengthened
recently on the back of dollar weakness caused by rising bets on
a U.S. interest rate cut.
The European Central Bank meets on Thursday, with traders
looking to see how concerned policymakers are about signs of a
downturn in growth.
Recession fears are sweeping across the world and central
banks have in recent weeks cut rates in what could signal the
start of a global monetary easing cycle.
The Japanese yen has been the main beneficiary from a shift
towards assets investors deem safer.
It rose as much as 0.3% to 108.07 JPY=EBS yen per dollar,
close to its strongest level since Jan. 10, after negotiations
in Washington on Wednesday aimed at averting U.S. tariffs on
Mexican goods showed little sign of progress.
U.S. President Donald Trump unexpectedly told Mexico last
week to take a harder line on curbing illegal immigration or
face 5% tariffs on all its exports to the United States.
The Mexican peso, already saddled with trade concerns, took
a hit after credit ratings agency Fitch downgraded its sovereign
debt rating on Wednesday by a notch from BBB+ to BBB, just two
notches above junk status.
The euro was 0.05% higher at $1.1227 EUR=EBS after
retreating 0.3% on Wednesday. The single currency has brushed a
1-1/2-month high of $1.1307 this week.
The ECB will try at Thursday's meeting to give the ailing
euro zone a boost and may even set the stage for more action
later this year as an escalating global trade war unravels the
benefits of years of monetary stimulus. It will also give
updated staff growth and inflation forecasts. "What matters during the ECB meeting today is whether the
Council will stick to its view that the economy will recover in
the second half of the year," Antje Praefcke, an analyst at
Commerzbank, wrote in a note to clients.
"Draghi would have to sound very concerned about the growth
and inflation outlook to cause a reaction in the euro."
ECB President Mario Draghi is expected to maintain guidance
about the possibility of more stimulus.
The dollar index against a basket of six major currencies
.DXY stooped to a two-month low of 96.749 midweek as benchmark
U.S. yields declined sharply this week to 21-month lows on
investor risk aversion and heightened prospects of the Federal
Reserve cutting interest rates.