Dollar stumbles after Trump tones down tough talk on trade

By Gregor Stuart Hunter SINGAPORE (Reuters) -The U.S. dollar remained under pressure on Monday as investors hoped Washington would temper its latest escalation of the trade war with Beijing after Friday's selloff, while political developments in France and Japan undermined the euro and the yen. The dollar index, which measures the greenback's strength against a basket of six currencies, was last down 0.1% at 98.908, following a short-lived rebound from declines after U.S. President Donald Trump announced 100% tariffs on China. The broadside revived bad memories of Trump's Liberation Day rollout of sweeping tariffs in April and sparked a selloff in stocks and cryptocurrencies on Friday. "Certainly it's pretty nervous out there," said Tim Kelleher, head of institutional FX Sales at Commonwealth Bank in Auckland.  "If you look at the U.S. and China stuff, it looks like Trump has done a bit of a TACO again and softened his tone," he added, referring to a trading adage that "Trump always chickens out." After announcing the 100% tariffs on Friday, Trump said on Truth Social on Sunday: "Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment," he posted on the Truth Social network. "He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!" Market liquidity may be affected by holidays as parts of the U.S. observe Columbus Day/Indigenous Peoples’ Day later on Monday, though stock exchanges remain open. Japan was closed on Monday to mark Health and Sports Day. The euro stood at $1.1622, unchanged in Asian trading, after the French presidency announced Prime Minister Sebastien Lecornu's new cabinet lineup on Sunday, reappointing Roland Lescure, a close ally of Emmanuel Macron, as finance minister. Against the yen, the dollar fetched 151.89 yen, strengthening 0.5% as markets assessed the path ahead for new Liberal Democratic Party leader Sanae Takaichi after Komeito quit the ruling coalition on Friday, dealing a blow to her hopes of becoming the first female prime minister of the world's fourth-largest economy. Cryptocurrency markets fluctuated between gains and losses after a sharp selloff on Friday, with bitcoin last trading down 0.2% at $114,849.14. Gold hit a fresh record of $4,068 an ounce and was last up 1.2%.  The offshore yuan traded at 7.1357 yuan per dollar, tacking on 0.2% in Asian trade after China's export growth picked up pace in September. "What China does in response to Trump’s latest tariff announcement will also affect how markets will respond in the coming days," said Vasu Menon, managing director for investment strategy at OCBC in Singapore. "Both the U.S. and China know that they cannot afford to ratchet up tensions too much, especially after having accomplished so much in trade talks in recent months," he added. "Ultimately, confrontation between the two superpowers could give way to reason, and the two leaders could prioritise their economies over their egos." The Australian dollar fetched $0.6525, rising 0.8% in early trade, while the kiwi traded at $0.5735, up 0.3%.  Sterling changed hands at $1.3347, up 0.1% so far on the day. (Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam and Jamie Freed)

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