NEW YORK - The safe haven Japanese yen gained on Friday and riskier currencies, including the Australian dollar, dropped as risk sentiment soured after U.S. President Donald Trump threatened to impose new tariffs on China over the coronavirus crisis.

Trump said on Thursday his hard-fought trade deal with China was now of secondary importance to the coronavirus pandemic and he threatened new tariffs on Beijing, as his administration crafted retaliatory measures over the outbreak.

“U.S. President Trump soured the mood in equity markets, raising his accusations against China about the coronavirus outbreak, threatening new tariffs,” Action Economics said in a report. “The yen has outperformed while commodity currencies have underperformed amid a sharp phase of risk-off positioning.”

The dollar fell 0.29% against the yen to 106.86 yen.

The Australian dollar, which on Thursday reached a seven-week high of $0.6569, dropped 1.20% to $0.6432.

The Chinese yuan also weakened in the offshore market to 7.1301 yuan, the most per dollar since April 2.

"Given the scale of the COVID-19 impact, there is certainly a high risk of geopolitical tensions escalating considerably as lockdowns reverse," said Derek Halpenny, head of research at MUFG.

"This would clearly be another hit to global trade that would add a layer of dollar support going forward," Halpenny said.

The euro continued to gain against the greenback, having also rallied on Thursday on month-end repositioning.

It was last up 0.38% at $1.0997, the highest since April 1.

Much of Europe and Asia was closed on Friday for International Workers' Day.

The dollar index against a basket of currencies =USD fell 0.31% to 98.81.

Deutsche Bank currency strategist George Saravelos said that if the United States imposes capital controls on China, it would be dollar-negative as that would imply outflows from greenback-denominated assets.

"If the move is politically driven, it would be a clear dollar negative in our view. It would lead to a shift in reserve holdings out of the USD into EUR, JPY, GBP, gold and other reserve proxies," Saravelos said.

The greenback gained 1.11% against the Canadian dollar as waning risk appetite hurt-growth sensitive economies.

Tiff Macklem, a former senior deputy at the Bank of Canada who has recently been a leading voice for a shift toward a low-carbon economy, has been named to take over as governor of the central bank, Finance Minister Bill Morneau said Friday. 

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Currency bid prices at 10:30AM (1430 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session Euro/Dollar EUR= $1.0997 $1.0955 +0.38% -1.90% +1.0998 +1.0935 Dollar/Yen JPY= 106.8600 107.1700 -0.29% -1.84% +107.4000 +106.6100 Euro/Yen EURJPY= 117.53 117.34 +0.16% -3.62% +117.6500 +117.0300 Dollar/Swiss CHF= 0.9604 0.9652 -0.50% -0.76% +0.9669 +0.9606 Sterling/Dollar GBP= 1.2535 1.2592 -0.45% -5.47% +1.2600 +1.2514 Dollar/Canadian CAD= 1.4096 1.3941 +1.11% +8.55% +1.4102 +1.3931 Australian/Doll AUD= 0.6432 0.6510 -1.20% -8.39% +0.6511 +0.6427 ar Euro/Swiss EURCHF= 1.0564 1.0574 -0.09% -2.67% +1.0583 +1.0554 Euro/Sterling EURGBP= 0.8771 0.8696 +0.86% +3.76% +0.8776 +0.8693 NZ NZD= 0.6060 0.6124 -1.05% -10.04% +0.6126 +0.6056 Dollar/Dollar Dollar/Norway NOK= 10.3229 10.2414 +0.80% +17.59% +10.3291 +10.2391 Euro/Norway EURNOK= 11.3530 11.2270 +1.12% +15.41% +11.3560 +11.2085 Dollar/Sweden SEK= 9.7951 9.7562 +0.83% +4.79% +9.8094 +9.7494 Euro/Sweden EURSEK= 10.7731 10.6848 +0.83% +2.94% +10.7781 +10.6872

(Reporting by Karen Brettell; Additional reporting by Olga Cotaga in London; editing by Jonathan Oatis) ((karen.brettell@tr.com))