Currency markets' risk-off mood eases; dollar flat; yen still up

LONDON (Reuters) - The dollar was little changed in London trading on Thursday as a mild overnight risk-off move, sparked by the United States and China clashing over Hong Kong, subsided.

Slideshow ( 3 images )

China warned the United States that it would take “firm counter measures” in response to U.S. legislation backing anti-government protesters in Hong Kong, and said attempts to interfere in the Chinese-ruled city were “doomed to fail”.

However, risk appetite started to return in London trading in the absence of signs that the negotiations for a “phase one” trade deal between the United States and China had been jeopardized.

The dollar index .DXY was last up less than 0.1%, trading within narrow ranges, while the Japanese yen - a perceived safe haven - was up around 0.1% versus the dollar JPY=EBS.

The Swiss franc was up less than 0.1% versus the dollar CHF=EBS.

“The moves have been quite modest because we’re still waiting to see what China’s response is - what they’ve said so far is quite vague,” said Adam Cole, chief currency strategist at RBC Capital Markets.

“They’ve not gone so far as to say explicitly that this threatens the phase one trade deal, which is clearly what markets are worrying about, and for that reason the reaction so far has been quite mild,” he said.

The offshore yuan was down 0.2% versus the dollar, still trading within the week’s ranges.

The trade-exposed Australian dollar traded almost flat against the U.S. dollar AUD=D3, recovering from six-week lows hit in overnight trading due to a combination of the risk-off mood and weak domestic data.

Record-low volatility and the U.S. Thanksgiving holiday mean traders are expecting a quiet day in markets.

Euro zone economic sentiment rebounded more than expected in November, with sentiment among consumers, in retail trade, and in industry, up from the previous month, but still negative overall.

German CPI data for November is due at 1300 GMT.

Reporting by Elizabeth Howcroft; Editing by Alison Williams and Toby Chopra