By Shinichi Saoshiro
TOKYO (Reuters) - The dollar struggled against the yen on Thursday as investors sought shelter in the safe-haven Japanese currency on concerns over the possibility of Western military action against Syria.
The geopolitical tensions shifted some focus away from the U.S.-China trade standoff, with the dollar last trading little changed at 106.810 yen <JPY=> after losing 0.4 percent overnight. The yen often draws demand in times of market turmoil and political tensions.
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The dollar had risen to 107.400 yen on Tuesday after comments from Chinese President Xi Jinping calmed fears over a U.S-China trade war, which had gripped global financial markets over the past few weeks.
The respite for the greenback was short lived, however, as focus shifted to the possibility of wider military conflict in the Middle East.
Tensions increased after U.S. President Donald Trump warned Russia on Wednesday of imminent military action in Syria over a suspected poison gas attack, declaring that missiles "will be coming" and lambasting Moscow for standing by Syrian President Bashar al-Assad.
"The yen has gained against the dollar on geopolitical concerns. The dollar has weakened against other currencies as well, but other factors are more at play, such as higher commodity prices and ECB monetary policy expectations," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
"As for the Syrian tensions, divisions are seemingly being drawn along Cold War era lines with the United States, Britain and France on one side and Russia on the other, suggesting any standoff could be prolonged," Yamamoto said.
The euro was up 0.05 percent at $1.2375 <EUR=> and on its fifth session of gains, supported this week as comments from European Central Bank officials reinforced views that the central bank is on track to normalize monetary policy.
Commodity-linked currencies were also buoyant against the dollar with crude oil prices at their highest since late 2014 due to the Syria tensions. The Canadian dollar reached a seven-week high of C$1.2545 per dollar <CAD=D4> overnight and last traded at C$1.2570.
The Australian dollar was steady at $0.7760 <AUD=D4> after touching $0.7773, the highest since Mar. 22.
The dollar index against a basket of six major currencies was down 0.1 percent at 89.457 <.DXY> after dipping overnight to a two-week trough of 89.355.
With attention on Syria the dollar did not receive much support from hawkish-sounding Federal Reserve meeting minutes.
All of the Fed's policymakers felt that the U.S. economy would firm further and that inflation would rise in the coming months, minutes of the central bank's last policy meeting on March 20-21 released on Wednesday showed.
The Hong Kong dollar fell to a new 33-year low of 7.8500 per dollar <HKD=D3> early on Thursday morning, hitting the lower end of the monetary authority's targeted trading band, as the interest rate gap between U.S. dollar and Hong Kong dollar widened further.
(Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam)