*

Japan to invest $550 billion in U.S., tariffs reduced to

15%

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Uncertainty over tariffs keeping forex market on edge

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Japanese PM Shigeru Ishiba denies reports he would quit

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Aussie dollar hits eight-month high, euro edges higher

(New throughout, updates headline and prices throughout, adds

fresh analyst comment)

By Alun John, Gertrude Chavez-Dreyfuss and Chibuike Oguh

LONDON/NEW YORK, July 23 (Reuters) - The U.S. dollar

strengthened against the Swiss franc and euro but weakened

versus the yen on Wednesday as positive sentiment from a new

U.S. trade deal was offset by political uncertainty surrounding

Japanese Prime Minister Shigeru Ishiba's future.

President Donald Trump announced a trade deal on Tuesday with

Japan, which lowers tariffs on auto imports to 15% in exchange

for a $550 billion package of U.S.-bound investment and loans.

It is the most significant of a clutch of agreements that Trump

has bagged since unveiling sweeping global levies in April.

The dollar gained against the Swiss franc, on

track to snap three straight sessions of losses. It was last up

0.24% to 0.79425.

Wall Street's main indexes were all advancing while U.S.

Treasury yields rose.

The greenback weakened against the yen, hitting its

lowest level since July 11 at 146.20 per dollar after reports

that Ishiba intends to step down next month following a bruising

upper house election defeat.

Ishiba denied the reports that he had decided to resign,

calling them "completely unfounded." The yen was last down 0.06%

at 146.565 yen.

"The main thing driving USD/JPY has to do with political

anxiety as it looks like the prime minister is feeling some

pressure to consider resigning," Juan Perez, senior director of

trading at Monex USA in Washington, told Reuters in a statement.

"This deal helps automakers, for now, but leaves markets

also wondering if at any point tariffs can be increased since

they will not go away as tools for negotiating anything and

everything. Japan, an advanced economy agreeing to new terms for

trade does leave concern that successful tariff use will give

incentive to keep using their threat."

The European Union and the U.S. are heading towards a trade deal

that would result in a broad tariff of 15% on EU goods imported

into the U.S., two diplomats told Reuters. The deal would mirror

a similar agreement the U.S. struck with Japan.

The euro pared earlier losses and was up 0.08% against the

dollar at $1.176250,.

The U.S. dollar has been one of the biggest losers among

major currencies since Trump announced sweeping tariffs on

trading partners on April 2. The weakness continued as those

duties were suspended to allow further negotiations, but has

steadied this month.

The August 1 deadline for tariff deals still looms for many

countries and investors remain cautious on how it will play out.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

fell 0.14% to 97.33, on track for four straight sessions of

losses.

"I think what the market is expecting is that there will be

a blanket tariff of a certain amount: let's just say 10% or so,

and that has been set in place for quite a while. And I believe

that it's discounted," said Jeff Young, head of investment

strategy, at PGIM Quantitative Solutions in New Jersey.

"The effect on the dollar is going to be ... folded into the

overall macro picture. And I think it's going to be difficult to

disentangle the exact impact of the tariff versus all the other

things that are affecting the currency because I do think that a

lot of that is pretty much already discounted."

Sterling was up 0.26% at $1.35690.

The Aussie hit an eight-month high and was last up

0.4% at U.S.$0.6584.

Currency

bid

prices

at 23

July​

05:27

p.m. GMT

Descript RIC Last U.S. Pct YTD High Low

ion Close Chang Pct Bid Bid

Previous e

Session

Dollar % % 272

Euro/Dol 1

Dollar/Y % 5 .15

Euro/Yen Dollar/S Sterling 7 351

7​

Dollar/C 576

Aussie/D 1 655

1

Euro/Swi Euro/Ste NZ 7 997

ollar

Dollar/N ​ % 053

5

Euro/Nor Dollar/S % 766

Euro/Swe