Dollar falls on Russia probe report, as Tokyo stocks slide

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Hong Kong (AFP)

The beleaguered dollar slumped again Friday after a new report on the investigation into alleged Russian interference in the US election sparked fresh turmoil, even as Wall Street eked out a new record.

The greenback was under renewed pressure against the Japanese yen, testing 110 in Tokyo, with analysts warning it could go lower still with US wages data out later in the day unlikely to offer much relief.

The emboldened yen, seen as a safe haven currency, acted as a drag on the Nikkei as it erodes exporters' international competitiveness, while Shanghai edged higher and Hong Kong was flat in morning trade.

Sydney stocks stabilised while the local dollar softened after the central bank cut its growth forecast.

The revelation by the Wall Street Journal that special counsel Robert Mueller has empanelled a grand jury to investigate Russia's interference in the 2016 presidential election -- a step towards possible criminal indictments -- triggered a furious reaction from President Donald Trump and dented gains on Wall Street.

The Dow still edged to a record for the seventh straight day Thursday, although the tech-heavy Nasdaq retreated.

"In no small way this yen strength is related to news that broke overnight that Robert Mueller has empanelled a grand jury as he continues to look into the Russia issue -- as the president called it," said Greg McKenna, chief market strategist AxiTrader.

Stephen Innes, who heads Asia-Pacific trade at forex firm OANDA, noted: "Another toxic elixir for the greenback is brewing."

- Oil prices retreat -

Traders were awaiting a key US jobs report that may provide clues on the strength of the world's top economy and the odds of an additional Federal Reserve rate hike this year.

But Chris Weston, Australia-based chief market strategist at IG Markets, cautioned the figures were unlikely to bolster the dollar.

"It's all about wages here, and ... specifically, if we can see more than a 30bp increase of wages (month-on-month) then perhaps, just perhaps, the USD can find some love," he said.

"It would be a big surprise though."

The dollar was also under pressure as a survey showed growth in the American services sector slowed sharply in July, shaking confidence in Friday's payroll data.

The euro, which had moved above $1.19 Wednesday for the first time since January 2015, was up against the greenback Friday at 1.1876.

The ailing US currency failed to bolster oil prices, as rising American production reinforced concerns about persistent glut.

"As far as the rise in production, that is something that definitely the bears are going to (latch) on to," said Phil Flynn, senior market analyst at Price Futures Group.

Oil climbed above the key $50-a-barrel-level this week for the first time since May as Saudi Arabia promised to cut exports but traders continue to keep an eye on US shale production.

In Europe, the pound dropped to this year's lowest point against the euro Thursday in reaction to the Bank of England cutting its forecast for the British economy as it left interest rates unchanged, in turn sending London stocks higher.

-- Bloomberg News contributed to this report --

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.4 percent at 19,956.58 (break)

Hong Kong - Hang Seng: UP less than 0.1 percent at 27,534.28

Shanghai - Composite: UP 0.1 percent at 3,276.54

Euro/dollar: UP at 1.1876 from $1.1874

Pound/dollar: DOWN at $1.3138 from $1.3142

Dollar/yen: UP at 110.10 yen from 110.02 yen

Oil - West Texas Intermediate: DOWN 44 cents at $49.03 per barrel

Oil - Brent North Sea: DOWN 20 cents at $52.01

New York - Dow: UP less than 0.1 percent at 22,026.10 (close)

London - FTSE 100: UP 0.9 percent at 7,474.77 points (close)