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* Yen steps back from 2 1/2-month low vs dollar
* Norwegian crown falls to record low vs dollar
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Elizabeth Howcroft
LONDON, Oct 16 (Reuters) - The dollar held near a four-week
low on Wednesday as trade tension between Washington and Beijing
continued to weigh on the global growth outlook.
The dollar's losses were most pronounced against the
Japanese yen, which had reached a two-and-a-half-month low amid
concern the trade war between China and the United States will
weigh on risk appetite.
"The retreat in USD/JPY is obviously a function of the
markets being a little nervous vis-à-vis any Chinese retaliation
to the measures passed (in the U.S.)," said Jeremy Stretch, head
of G10 foreign exchange strategy at CIBC Capital Markets.
The yuan fell after Beijing criticised new U.S. legislation
backing pro-democracy protests in Hong Kong.
Reports of a "Phase 1" trade deal between the United States
and China last week initially cheered markets. Lack of details
on the agreement has since curbed any enthusiasm.
"Markets are still cautiously optimistic that any unwind of
the trade negotiations is not going to be a material one," he
added.
Escalating trade tariffs from China and the United States
over the past year have forced central banks to cut interest
rates as global growth expectations weaken.
On Tuesday, the International Monetary Fund said it expected
the global economy to grow 3.0% in 2019, its slowest pace since
the 2008-09 financial crisis. "The cost of taking this dispute to its next stage of
escalation has exponentially increased," Morgan Stanley
strategists said in a daily note, although they added the United
States and China might adopt a more nuanced approach to the
trade dispute in the coming days.
Elsewhere, the Norwegian crown NOK= weakened to its lowest
since July 2001 at 9.1925 per dollar NOK=D3 and its weakest
against the euro since December 2008 EURNOK=D3 .
Norway is a major exporter of oil, making it particularly
sensitive to economic tensions. The central bank has said this
week it expects to keep interest rates on hold. Trade-oriented currencies such as the Australian dollar
AUD=D3 and the New Zealand dollar NZD=D3 also weakened. The
kiwi dollar last traded down -0.5% at 0.6261.
Against an index of six other currencies .DXY , the dollar
was weaker at 98.27 and just above an intraday low of 98.16
reached in Asian trading, its lowest in nearly four weeks.