Global trade tensions and growth concerns underpin the yen; Brexit Summit in brief

TOKYO (Reuters) – The safe-haven Yen remained in demand on Wednesday as investor caution prevailed because of new trade tensions between the United States and Europe and the deterioration by the International Monetary Fund of its global economic outlook .

Most major currencies have been stuck in narrow trading ranges, with market participants generally staying on their lines in the run-up to a crucial Brexit summit and a decision by the Bank European Central Bank in interest rates later in the day.

The general sentiment prevailing in the market remained subdued, as the outbreak between the US and Europe added to other potential global hot spots related to trade, including Sino-US negotiations.

"There are now two-pronged battles for the United States," said Bart Wakabayashi, director of the Tokyo branch of State Street Bank.

"If they are going to lead the world economy, it will be inherently more difficult to wage all these trade wars … on many fronts," he said.

Faced with a basket of key rival currencies, the dollar rose slightly to reach 97,036.

The dollar was a little lower at 111,135 yen. On a three-week high of 111.825 swept away on Friday, the US unit fell nearly two-thirds percent.

Yukio Ishizuki, currency strategist at Daiwa Securities, said the Japanese currency had regained support ahead of the unprecedented 10-day holiday that ran from late April to early May in Japan to mark the rise of the new currency. Emperor, Crown Prince Naruhito.

"Above all, Japanese companies manage their operations with caution. At the current stage, many of them will naturally sell the dollar, "said Ishizuki.

"It will be easy for the yen to strengthen until the end of the ten days of vacation," he added.

The Australian dollar was up 0.1% to 0.7129 USD, erasing an earlier loss after finding support in a speech delivered by a senior Australian central bank official.

The Reserve Bank of Australia is closely following the evolution of the divergence between a seemingly sluggish economy and a vigorous labor market to help determine the direction monetary policy is taking, Deputy Governor Guy Debelle said.

On Monday, the US Trade Representative proposed a list of EU products, ranging from large commercial aircraft and their parts to dairy products and wine, on which tariffs could be applied in retaliation for grants to European aircraft.

On Tuesday, the IMF lowered its global growth forecast for 2019 to 3.3 percent, the slowest growth since 2016 and its previous forecast of 3.5 percent in January.

The global lender said that a sharp slowdown could force world leaders to coordinate their stimulus measures.

On Wednesday, investors will focus on the ECB's interest rate decision, a press conference by ECB President Mario Draghi, and the publication of the minutes of the latest Federal Reserve meeting.

Prior to the Brexit summit meeting, the euro and the pound sterling were virtually unchanged, trading at $ 1,125 and $ 1,305 respectively.

European Union leaders are likely to grant a second deadline to Prime Minister Theresa May for the exit of England, but they could demand that she accept a much longer extension, France pushing for conditions to limit Britain's ability to undermine the bloc.

The latest IMF forecast, combined with lower oil prices, has put pressure on commodity currencies such as the Canadian dollar.

The Canadian dollar weakened slightly to $ 1.3334 Cdn after being pulled overnight from its strongest level since March 21st.

Chart: World exchange rates in 2019 (tmsnrt.rs/2egbfVh)