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Trump's Truth Social message reassures traders

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Crypto markets unsteady after weekend volatility

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Gold at fresh record highs

(Updates prices, adds comment and context from paragraph 14)

By Gregor Stuart Hunter and Amanda Cooper

SINGAPORE/LONDON, Oct 13 (Reuters) - The dollar clawed

steadily higher on Monday, as investors hoped the U.S. would

temper its latest escalation of the trade war with China after

Friday's selloff, while political developments in France and

Japan undermined the euro and the yen.

The dollar index, which measures the U.S. currency's

performance against a basket of six others, was last up 0.2% at

99.2, recovering from declines late last week after U.S.

President Donald Trump announced 100% tariffs on China.

The broadside revived bad memories of Trump's Liberation Day

rollout of sweeping tariffs in April and sparked a selloff in

stocks and cryptocurrencies on Friday.

TRUMP SOFTENS TONE

"Certainly it's pretty nervous out there," said Tim

Kelleher, head of institutional FX Sales at Commonwealth Bank in

Auckland.

"If you look at the U.S. and China stuff, it looks like

Trump has done a bit of a TACO again and softened his tone," he

added, referring to a trading adage that "Trump always chickens

out."

After announcing the 100% tariffs on Friday, Trump said on

Sunday: "Don't worry about China, it will all be fine!

Highly respected President Xi just had a bad moment," he

posted on the Truth Social network. "He doesn't want Depression

for his country, and neither do I. The U.S.A. wants to help

China, not hurt it!!!"

Market liquidity may be affected by holidays as parts of the

U.S. observe Columbus Day/Indigenous Peoples' Day later on

Monday, though stock exchanges remain open. Japan was closed on

Monday to mark Health and Sports Day.

The euro fell 0.3% to $1.1584, shrugging off the

French presidency's announcement of Prime Minister Sebastien

Lecornu's new cabinet lineup on Sunday, reappointing Roland

Lescure, a close ally of Emmanuel Macron, as finance minister.

Against the yen, the dollar rose 0.8% to 152.295 yen.

Markets assessed the path ahead for new Liberal Democratic

Party leader Sanae Takaichi after Komeito quit the ruling

coalition on Friday, dealing a blow to her hopes of becoming the

first female prime minister of the world's fourth-largest

economy.

Cryptocurrency markets fluctuated between gains and losses

after a sharp selloff on Friday, with bitcoin last trading up

0.2% at $115,313. Gold hit a fresh record of $4,079.1 an

ounce and was last up 1.5%.

The offshore yuan recovered some stability to trade at

7.1416 per dollar, having reached a weak point of 7.144

overnight, after data showed China's export growth picked up

pace in September.

POSSIBLE CARRY TRADE IMPACT

Even with sentiment on the up on Monday, analysts said the

mood was fragile and currencies were likely prone to larger

price swings.

"As we saw earlier this year neither side can tolerate such

high tariffs for long and the comments from President Trump over

the weekend again point towards a path for de-escalation," MUFG

strategist Lee Hardman said.

"As a result, the trade threats may just contribute a more

volatile FX market in the near-term and trigger some unwind of

carry trades," he added.

Traders will often borrow in a low-yielding currency to

invest in a higher-yielder, known as a carry trade. The Japanese

yen and Swiss franc have typically been funding currencies and

took a harder knock than others on Monday.

The Australian dollar, which tends to rally in a risk-on

environment, rose 0.75% to $0.6521, making it the

best-performing major currency against the dollar on Monday. The

pound, a fellow risk-on currency, was flat at $1.3327.