September 13, 2018 / 12:18 AM / 2 months ago

FOREX-Renewed hopes for U.S.-China trade talk weigh on dollar, lift yuan

* Dollar demand ebbs as US-China trade tensions ease

* U.S. seeking new round of trade talks with China -WSJ

* Euro, pound firm ahead of ECB and BoE policy decisions

* ECB, BoE widely expected to leave interest rates unchanged

* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

By Shinichi Saoshiro

TOKYO, Sept 13 (Reuters) - The dollar came under pressure and the Chinese yuan held gains on Thursday after a report that Washington was seeking a new round of trade talks with Beijing reduced safe-haven demand for the U.S. currency.

The euro and the pound stood firm ahead of policy decisions by the European Central Bank and the Bank of England scheduled later in the day.

The dollar index against a basket of six major currencies stood little changed at 94.831 after declining about 0.5 percent the previous day.

The greenback fell after the Wall Street Journal reported on Wednesday that senior U.S. officials led by Treasury Secretary Steven Mnuchin had sent invitations to their counterparts in Beijing proposing another round of bilateral trade talks.

“The dollar did dip on the latest trade-related headlines, but it is hard to imagine the situation improving dramatically on this meeting alone. Currencies will continue reacting to each bit of news about the U.S.-China trade conflict,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

China’s yuan rose 0.6 percent to 6.8345 per dollar in offshore trade on Wednesday on the renewed hopes for U.S.-China trade discussions.

The Australian dollar, seen as a liquid proxy of China-related trades as well as a barometer of risk sentiment, was steady at $0.7174 after surging 0.7 percent overnight.

Data on Wednesday showing that U.S. producer prices fell in August for the first time in 1-1/2 years also weighed on the dollar.

The pound was steady at $1.3046 after edging up 0.1 percent the previous day after Brexit-supporting lawmakers in British Prime Minister Theresa May’s party publicly pledged support for her to stay in power.

The Bank of England is expected to keep interest rates on hold on Thursday, giving the economy time to digest August’s increase in borrowing costs, which was only the second such move in the decade since the financial crisis.

“The BoE as well the ECB policy meetings today are not expected to be major market-moving events and they are not drawing too much attention. But it does remain to be seen if the BoE makes any mention of the recent Brexit talks,” said Ishizuki at Daiwa Securities.

The European Central Bank is all but certain to keep policy unaltered on Thursday, making only nuanced changes to its guidance to stay on course to end bond purchases this year and raise interest rates next autumn.

The euro was flat at $1.1627 after edging up 0.2 percent overnight.

The dollar was little changed at 111.21 yen after losing roughly 0.4 percent the previous day. (Reporting by Shinichi Saoshiro; editing by Richard Pullin)

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