In This Article:
* Dollar steadies, safe havens up after U.S. shuts China consulate
* China to respond on Friday - Global Times Editor
* Strong euro has dollar headed for largest weekly drop since June
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, July 24 (Reuters) - The safe-haven yen advanced to a one-month high on Friday as deteriorating Sino-U.S. relations heightened investor anxiety, while a surging euro put the beleaguered dollar on track for its worst week in a month.
China has said it "must" retaliate after the U.S. ordered its Houston consulate to shut this week, amid allegations of spying. The editor of China's Global Times said on Twitter that Beijing will announce countermeasures on Friday and ask one U.S. consulate to close.
Earlier on Thursday U.S. Secretary of State Mike Pompeo said Washington and its allies must use "more creative and assertive ways" to press the Chinese Communist Party to change its ways, calling it the "mission of our time." While trading volumes were lightened by a public holiday in Japan, the palpable tensions were enough to rouse the yen from a range it has kept for weeks.
The yen rose 0.3% to 106.51, its strongest since late June. The Australian and New Zealand dollars were also off from multi-month highs and the Chinese yuan struggled for headway.
"The general concern is that any escalation in U.S-China tensions is bad and is putting the trade deal at risk," said Kim Mundy, an FX analyst at the Commonwealth Bank of Australia in Sydney.
"If we see China retaliating today, our view is that Aussie and the other growth-linked commodity currencies can fall," she said, with a dip likely to shove the Aussie back in the 68 cent to 70 cent range it held for several weeks.
The Australian dollar drifted higher to $0.7112, and is up about 1.7% for the week, but roughly 1% below a 15-month high touched on Wednesday.
The New Zealand dollar was at $0.6641, just under a 7-month high of $0.6690 touched on Thursday.
The safe-haven Swiss franc also hit a four-month peak of 0.9243 per dollar. Weaker-than-expected U.S. employment data had rattled U.S. markets overnight.
FAREWELL, CHENGDU?
Sino-U.S. ties have deteriorated over issues ranging from the novel coronavirus pandemic, which began in China, to Beijing trade and business practices, its territorial claims in the South China Sea and its clampdown on Hong Kong.
A tit-for-tat consulate closure is shaping as among the most likely Chinese reply to the Houston consulate eviction.