By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The dollar stumbled on Friday after President Donald Trump ordered U.S. companies to start looking for an alternative to China as Beijing imposed more tariffs on American goods, further exacerbating a prolonged trade war between the world's two largest economies.

That triggered mass selling in the dollar, which fell from a three-week high against the euro and to one-week troughs versus the Japanese yen and Swiss franc. Benchmark U.S. 10-year Treasury yields also fell sharply.

The dollar, however, strengthened against the Chinese yuan in the offshore market, hitting a two-week high .

"Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA," Trump wrote on Twitter.

Trump cannot legally compel U.S. companies to abandon China immediately. He gave no detail on how he might proceed with any such order.

His tweet followed China's announcement on Friday of retaliatory tariffs on about $75 billion worth of U.S. goods, putting as much as an extra 10% on top of existing rates.

"All of this adds to uncertainty in terms of geopolitics," said Fran Rodilosso, head of fixed income portfolio management at VanEck in New York. "Obviously, the uncertainty is with regard to global growth and that has been everyone's chief concern."

Trump's comments overshadowed a speech by Federal Reserve Chair Jerome Powell, who did not announce a major stimulus measure to ease a worsening global economic outlook, but set the stage for further interest rate cuts.

Powell said the U.S. economy was in a "favorable place" and the Fed would "act as appropriate" to keep the economic expansion on track.

"Fed Chairman Powell's speech at Jackson Hole suggests that he is leaning toward a September rate cut, but he did not lay out a reaction function regarding the Fed's rate path beyond September," said Philip Marey, senior U.S. strategist, at Rabobank. The Fed's annual economic symposium in Jackson Hole, Wyoming, ends on Saturday.

Trump, however, was enraged by Powell's speech, saying he was not sure who was the bigger enemy, the U.S. central bank chief or Chinese leader Xi Jinping.

"As usual, the Fed did NOTHING! It is incredible that they can 'speak' without knowing or asking what I am doing, which will be announced shortly," Trump wrote on Twitter.

"By escalating the trade war, President Trump will get what he wants from the Fed: lower rates," said Rabobank's Marey.

In afternoon trading, the euro rose 0.6% to $1.1148 , after touching a three-week low of $1.1052. An index that tracks the dollar against six major currencies <.DXY> was down 0.6% at 97.624.

The dollar fell to a one-week low against the yen and was last down 1.1% at 105.32. It earlier hit a one-week high of 106.73 yen.

Against the Chinese yuan, the dollar was up 0.6% at 7.1314 yuan, after touching a two-week peak of 7.1383.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis, Bernadette Baum and Richard Chang)

Forex Reuters