TOKYO: The dollar hovered near a four-week high on Wednesday, supported by higher US yields after the United States eased trade restrictions on Chinese telecommunications equipment maker Huawei Technologies.
The move came as a relief to markets hit by escalating trade tensions between the United States and China, though analysts said sentiment remained fragile with tariff negotiations between the world's two largest economies yet to produce a durable solution.
"The trade dispute won't be resolved easily, so the risk-off mood won't come off all of a sudden.
I think market sentiment will rather improve one small step at a time," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
Against a basket of key rival currencies, the dollar was last a shade lower at 98.014, having brushed a 3-1/2-week high of 98.134 overnight. The index has risen 1.9pc so far this year.
The US Commerce Department blocked Huawei Technologies Co Ltd from buying US goods last week, leading several companies to suspend business with the world's largest telecoms equipment maker.
Chipmakers, many of which sell to Huawei, bore the brunt of the sell-off. But late on Monday, the United States granted Huawei a licence to buy US goods until Aug. 19.
Against the yen, the dollar was largely steady at 110.49 yen , having hit a two-week high of 110.675 during the previous session. The greenback has recovered 1.4pc from a three-month trough of 109.02 yen touched on Monday last week.
Japan's exports fell 2.4pc in April from a year earlier, down for a fifth straight month, in a sign of weakness in external demand, finance ministry data showed, compared with a 1.8pc decrease expected by economists in a Reuters poll.
Sumitomo Mitsui's Sera said the yen's weakness overnight was thanks to the higher US Treasury yields, which ticked up in response to the recovery in US equities.
"When yields are rising, it's natural for the dollar to be bought. I think moves in US yields are really important," she said.
The 10-year US Treasury note yield was last largely unchanged at 2.423pc after moving further off a seven-week low of 2.354pc brushed on Thursday during the previous session.
The euro was steady at $1.1162.
The single currency, which has given up 0.9pc from this month's high touched on May 1, has been under pressure in recent weeks on dollar strength and due to concerns the upcoming European parliamentary elections may see euroskeptic parties faring well.
The pound was at $1.2713, hovering near a four-month low of $1.2685 touched overnight.
It briefly rose overnight after Prime Minister Theresa May set out a "new deal" for Britain's departure from the EU, offering sweeteners to Parliament including the chance to vote on whether to hold a second referendum to try to break the impasse over Brexit.
Yet traders doubted that a fractious Parliament would have to back any new referendum.
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