Dollar weakens vs. yen as investors turn cautious

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - The dollar weakened to a more than six-week low against the yen on Tuesday, dipping below a key technical level as Treasury debt yields slipped on increased caution ahead of a trio of potentially market moving events on Thursday.

Nervous investors piled into low-risk bonds and other safe-haven assets on worries linked to Britain's general election, the European Central Bank's policy meeting and former FBI Director James Comey's testimony before a Senate panel, all scheduled for Thursday.

"I think there's a lot of anxiety ahead of Thursday's events," said Alfonso Esparza, senior currency analyst at OANDA in Toronto.

The dollar was down 0.92 percent against the yen at 109.43 yen, having broken below its 200-day moving average to touch 109.23 yen, its lowest since April 21.

"It's safe-haven (demand) as well as the technical break that's driving dollar-yen," said Brad Bechtel, managing director FX at Jefferies in New York.

Comey, fired by President Donald Trump in May, will be grilled by the Senate Intelligence Committee on whether Trump tried to get him to back off an investigation of alleged ties between his 2016 campaign and Russia.

Worries about the situation have added to market doubts over the Trump administration's ability to deliver a promised boost to growth and recently weighed on the dollar.

The greenback could weaken to as low as 106 yen ahead of Thursday's testimony, Esparza said. The dollar index <.DXY>, which tracks the greenback against six major rivals, was down 0.24 percent at 96.567.

The euro was up 0.2 percent against the dollar to $1.1275. The common currency has gained in recent weeks on various factors, including an ebb in French political concerns and upbeat euro zone data.

However, complacency that the ECB will be less dovish has left the euro vulnerable to disappointment if the central bank does not satisfy those expectations, analysts said.

With two days to go until Britain holds a national election, the pound saw choppy trading as opinion polls have shown that Prime Minister Theresa May's lead over the opposition Labor party has ebbed over the last three weeks.

Sterling was down 0.05 percent against the greenback after falling to as low as $1.2873 earlier in the session.

Mexico's peso extended gains to a second straight day after the U.S. and Mexican governments reached a new agreement to significantly shift their sugar trade mix.

(To view a graphic on 'Global foreign exchange rates' click http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html)

(Reporting by Saqib Ahmed; Editing by Dan Grebler and Chris Reese)

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