FOREX-Aussie keeps gains after steady RBA, but Sino-U.S. tensions temper mood

* AUD, NZD edge higher after recouping Monday's losses
* Heightened Sino-U.S. tensions drag on yuan
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates after RBA rate announcement)
By Tom Westbrook
SINGAPORE, May 5 (Reuters) - The dollar handed back a sliver
of recent gains to commodity currencies on Tuesday as oil prices
bounced back, but hung on against the yuan as traders weighed
optimism about a coronavirus recovery in China against fears
about rising Sino-U.S. tensions.
The Australian dollar AUD=D3 inched further up over 64
cents at $0.6454 after the Reserve Bank of Australia left its
targets for the cash rate and three-year government bond yields
unchanged at 0.25%, but forecast the economy would suffer its
largest ever contraction in the first half of the
year. While RBA Governor Philip Lowe said a delay or reimposition
of restrictions to contain the pandemic could make economic
outcomes more challenging, the Aussie's rally this week has been
helped by a drop in cases and lifting of some local
restrictions.
The kiwi NZD=D3 was a shade higher too, at $0.6070.
Public holidays in Japan and China lightened trade, while
caution on the global growth outlook capped further moves.
AUD/
The yuan CNH=D3 rose to 7.1195 per dollar in offshore
trade, recovering from a six-week low of 7.1560 hit in the
previous session, but well below the range where it spent last
month.
U.S. President Donald Trump has stepped up verbal attacks on
China ahead of a Nov. 3 election where both he and Democratic
contender Joe Biden are jostling to project a tough stance
against the United States' main strategic rival.
An internal Chinese report warned Beijing faces a rising
wave of worldwide hostility in the wake of the outbreak that
could tip relations with the United States into confrontation,
people familiar with the paper told Reuters. Trump has floated tariffs, or even reneging on U.S. debt
obligations to China as retaliatory possibilities as he seeks to
pin blame for the COVID-19 pandemic, tempering traders' optimism
about progress towards economic recovery elsewhere.
"The yuan is that bellwether that everybody's going to be
looking at," said Stephen Innes, chief global market strategist
at AxiCorp. Its softness muted gains in Asian currencies, such
as Malaysia's ringgit MYR= , he said, even as oil prices
bounced.
The cautious trading backdrop also pushed the yen ahead
slightly to 106.58 per dollar JPY= , within striking distance
of multi-month lows.
U.S. crude rose CLc1 6.6% and Brent LCOc1 around 5% as
production fell and countries around the globe including Italy,
Finland and several U.S. states eased lockdown restrictions.
O/R
Elsewhere, the euro was pressured by a court challenge from
German academics to the European Central Bank's bond buying
programme. A ruling is due later on Tuesday and while outright
rejection of the German Bundesbank's participation in the asset
purchases appears unlikely, anything less than a clear-cut
defeat of the challenge could hit the single currency.
The euro EUR= last sat at $1.0906, close to a week-low hit
overnight. The pound GBP= was rangebound at $1.2461.