January 9, 2019 / 3:51 PM / 15 days ago

FOREX-Dollar drops to lowest since October on U.S.-China trade hope

    * Beijing and Washington agree to extend trade talks
    * Euro, sterling rise as trade hopes boost risk appetite
    * Oil up; lifts Australian, New Zealand, Canadian dollars
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (New throughout, updates prices, market activity, comments,
adds FX table; new byline, changes dateline, previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 9 (Reuters) - The dollar sank on Wednesday to
its lowest since October, with gains led by the euro and
sterling, as risk appetite improved on optimism over U.S.-China
trade negotiations, prompting investors to reduce their
safe-haven bets.
    After initially slipping following poor German and French
economic data, the euro recovered to post its highest in about 
three months.
    News that China and the United States had extended trade
talks in Beijing for an unscheduled third day boosted oil prices
and broader sentiment. Expectations of more easing in China
helped the mood as well, with Asian and European shares
rallying.
    "As long as you don't see a situation where there is a
negative turn much like what we saw over the last quarter, 
markets will probably view any trade development, even if
they're not concluded by the March 1 deadline, with modest
optimism just because it reduces the downside risk to the
outlook," said Mazen Issa, senior FX strategist, at TD
Securities in New York. 
    In mid-morning trading, the dollar index fell 0.6 percent to
95.341, after sliding to a three-month trough.
    The euro rose 0.9 percent to $1.1537, while sterling
gained 0.7 percent versus the dollar to $1.2797.
    Europe's single currency briefly gave up gains after
disappointing trade data out of Germany and a fall in consumer
confidence in France.
    A day earlier, regional data showed German industrial output
fell for the third straight month, feeding investor concern
about a slowdown.
    Against the yen, the dollar was down 0.6 percent at 108.183

    Commodity-linked currencies also jumped, buoyed by the
recovery in oil and trade talk hopes. 
    The Australian dollar, a barometer of sentiment toward
China, was up 0.7 percent at US$0.7190. The Aussie has
bounced off near-decade lows below $0.68 reached earlier this
month.
    The rally in riskier assets has accelerated since last
Friday when Federal Reserve Chairman Jerome Powell said he was
aware of risks to the economy and would be patient and flexible
in policy decisions.
    That eased concern the Fed would be raising rates as the
U.S. economy weakened.
    "The FOMC (Federal Open Market Committee) minutes today, and
Jay Powell's speech tomorrow, will give us an update of Fed
thinking and of how much the other FOMC members are in agreement
with the Chairman. If the message is still one of willingness to
pause, and sensitivity to markets, the dollar won't get any
help," said Kit Juckes, Societe Generale's currency strategist.
    
    ========================================================
    Currency bid prices at 10:20AM (1520 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1538        $1.1440     +0.86%         +0.00%      +1.1540     +1.1436
 Dollar/Yen       JPY=        108.1800       108.7300    -0.51%         +0.00%      +108.9900   +108.1600
 Euro/Yen         EURJPY=     124.84         124.40      +0.35%         +0.00%      +125.0700   +124.3700
 Dollar/Swiss     CHF=        0.9735         0.9811      -0.77%         +0.00%      +0.9820     +0.9734
 Sterling/Dollar  GBP=        1.2800         1.2717      +0.65%         +0.00%      +1.2801     +1.2712
 Dollar/Canadian  CAD=        1.3205         1.3272      -0.50%         +0.00%      +1.3279     +1.3180
 Australian/Doll  AUD=        0.7190         0.7139      +0.71%         +0.00%      +0.7193     +0.7135
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1236         1.1225      +0.10%         +0.00%      +1.1248     +1.1211
 Euro/Sterling    EURGBP=     0.9015         0.8997      +0.20%         +0.00%      +0.9025     +0.8975
 NZ               NZD=        0.6805         0.6721      +1.25%         +0.00%      +0.6807     +0.6723
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.4621         8.5471      -0.99%         +0.00%      +8.5526     +8.4648
 Euro/Norway      EURNOK=     9.7652         9.7821      -0.17%         +0.00%      +9.7875     +9.7544
 Dollar/Sweden    SEK=        8.8726         8.9277      +0.26%         +0.00%      +8.9460     +8.8732
 Euro/Sweden      EURSEK=     10.2400        10.2136     +0.26%         +0.00%      +10.2440    +10.1946
 
 (Additional reporting by Tommy Wilkes in London; Editing by
David Gregorio)
  
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