* Chinese yuan still below 7 vs dollar
* Sign traders still nervous about U.S.-China trade deal
* Sterling stronger on predictions of Conservative win
* PM Johnson says candidates would back Brexit deal
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh (Updates prices, adds chart)
By Olga Cotaga
LONDON, Nov 18 (Reuters) - The euro jumped to an 11-day high against the U.S. dollar on Monday, driven by expectations that Washington and Beijing can soon sign off on a deal to end a damaging trade war.
Europe’s export-oriented economy has suffered from the 16 month long dispute between the world’s two largest economies, which has taken a toll on global manufacturing.
Chinese state news agency Xinhua reported on Sunday that the two sides had “constructive talks” over the weekend.
“Market participants remain optimistic that a partial U.S.-China trade deal will be signed soon and have welcomed tentative signs of economic improvement outside of the U.S., especially in the euro zone, both of which are eroding the relative appeal of the U.S. dollar,” Lee Hardman, currency analyst at MUFG, said.
European equities have seen inflows of $3 billion over the past two weeks, ending a record run of 85 weeks of persistent outflows, EPFR data showed last week.
The euro was up 0.1% at $1.1060, having earlier reached $1.1068, its highest since Nov. 7. The index which tracks the greenback against six major currencies was flat at 97.95 after easing to an earlier low of 97.82.
Hedge funds have increased their short positions on the U.S. currency slightly in the week to Nov. 12, CFTC data showed on Refinitiv.
Against the Japanese yen, however, the dollar was stronger by 0.3% at 109.05.
The offshore Chinese yuan, however, remained below 7 per dollar, last falling 0.2% to 7.0175. The yuan is the most sensitive currency to the trade dispute.
“Dollar/yuan above 7 suggests that the market is not yet convinced a solution is near,” said Marshall Gittler Chief Strategist at FX analysis firm ACLS Global.
The liveliest mover was the pound, up 0.5% against the dollar to $1.2966 and rising against the euro to 85.30 pence. It has surged to a four-week high of $1.2985 versus the dollar and a six-month high of 85.22 pence versus the European common currency.
Sterling was boosted by expectations that the Conservative (Tory) Party could win a majority in the Dec. 12 election.
It was also supported by British Prime Minister Boris Johnson saying that all Tory candidates in the election have pledged to back his Brexit deal, which could open the door to getting the agreement through parliament.
Johnson’s Conservatives have a 14 point lead over the opposition Labour Party, a poll published on Monday by Good Morning Britain showed.
“Anyone firmly believing in a Tory victory can expect further potential in sterling,” said Commerzbank analysts in a note to clients, though they added that “the FX market is still quite sceptical” about a Tory win.
Reporting by Olga Cotaga; Additional reporting by Tom Westbrook in Singapore; Editing by Alexander Smith