September 23, 2019 / 5:38 AM / 3 months ago

FOREX-Safe-haven yen drifts lower as Sino-U.S. trade jitters calm

* U.S., Chinese negotiators describe talks in positive terms

* Yen sold, Aussie and kiwi rally

* Moves slight as caution abounds

By Tom Westbrook

SINGAPORE, Sept 23 (Reuters) - The safe-haven Japanese yen fell against most major currencies on Monday, with investors’ appetite for riskier assets improving after talks in Washington between U.S. and Chinese trade deputies were described as “productive”.

The currency was sold in favour of the euro and greenback, but trade-exposed currencies, such as the Australian and New Zealand dollars rose further, with the Aussie heading toward its best day against the yen in two weeks with a 0.4% gain.

However, volumes were dampened by a public holiday in Japan and by the anticipation that central banks on both sides of the Tasman Sea will sound dovish in scheduled remarks this week.

Investors are also looking to September flash manufacturers surveys in Europe and the United States, due later on Monday, for the latest insight into the health of the global economy, with weak readings a risk to delicate global sentiment.

“We’ve got a couple of headlines insisting that the trade talks are on track,” said Westpac currency strategist Sean Callow in Sydney. “That’s helped a little bit,” he said, though adding that global risk appetite remained fragile.

“Having gone into the weekend in a fairly nervous and risk-off fashion, weekend news has provided a little bit of comfort and helped the Aussie to recover a small amount of lost ground.”

The yen drifted 0.15% lower against the dollar to 107.72 , and weakened 0.2% against the euro to 118.71.

The Australian and New Zealand dollars each rallied, though not enough to recoup Friday’s losses that pushed both currencies to multi-week lows. The Australian dollar rose 0.2% to $0.6776 and the kiwi climbed almost 0.3% to $0.6271.

Against a basket of currencies the dollar was mostly flat around 98.500 and it held steady at $1.1020 per euro .

China’s yuan climbed as high as 7.0967 per dollar in offshore trade, before retracing most of its gains to hit 7.1114 by mid-session in Asia as fears of a gloomier outcome to the trade talks crept back in and Chinese stocks fell.

“I think there’s still a lot of nervousness around,” said Shane Oliver, chief economist at AMP Capital in Sydney, citing Middle East tensions and the whipsawing fortunes of the U.S-China trade dispute as key drivers.

“These things have a habit of escalating and de-escalating and then escalating is a bit finely balanced at the moment,” he said.

A U.S.-China trade breakthrough had seemed unlikely after President Donald Trump told reporters on Friday he was “not looking” for a partial deal, and Chinese officials then cancelled goodwill visits to U.S. farmers.

But both sides later published positive statements, with the U.S. Trade Representative’s office describing the talks as “productive” and China’s Commerce Ministry calling them “constructive.” October’s high-level talks remain on track.

The British pound was flat at $1.2470, after toppling on Friday from a two-month high as hopes for a Brexit deal soured. On Monday, British Prime Minister Boris Johnson also cautioned against the likelihood of a breakthrough.

But the Sun newspaper reported, citing a senior government source, that Johnson and U.S. President Donald Trump have agreed to strike a UK-U.S. trade deal by July next year.

The Chicago Fed National Activity Index is also due on Monday, while New York Fed President John Williams makes a scheduled speech after the central bank on Friday said it plans more intervention in the U.S. funding market to bolster dollar liquidity. (Editing by Jacqueline Wong)

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