* U.S.-China trade talks due to start on Wednesday
* Euro slips below last week’s $1.14 tipping point
* Dollar gains and emerging market currencies mostly dip
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Revises headline, lead, rates, adds analyst quote, changes dateline to NEW YORK, previous LONDON)
By Kate Duguid
NEW YORK, Aug 20 (Reuters) - The dollar fluctuated on Monday morning, strengthening modestly against the euro over continuing trepidation about Turkey and the risk of contagion it poses to Europe, before retracing those gains as risk-on trades boosted the euro.
“In the European session, emerging market tension had the dollar bid, and since then we’ve had a positive open. ... It’s a risk-on session, and the dollar has come off accordingly,” said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.
Against the U.S. currency, the euro strengthened to $1.144, half a basis point higher than its session trough. Against the Canadian dollar, the greenback weakened less than a basis point to 1.307.
The dollar has gained in recent weeks, hitting a 2018 high last week, as investors seek safety, while emerging markets and the euro have suffered.
Concerns that the currency crisis in Turkey could hurt euro zone banks and uncertainty about the Italian government’s planned budget had weighed on the euro earlier in the morning, analysts said.
“The euro is starting to reflect greater short-term domestic political angst,” ING strategist Viraj Patel said.
“Investors will be cautious over Turkey’s medium-term economic plan, while the next month or so will also see a narrower focus on the risks around (the) Italian budget,” he said.
The dollar also had gained early in the North American session ahead of trade talks between the United States and China, due this week, which investors hope will ease tensions between the world’s two biggest economies.
“The market is giving the resumption of U.S.-China trade talks the benefit of the doubt that they could be a stepping stone to a meaningful breakthrough,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Dealers cited speculation that the talks could set the stage for a summit between U.S. President Donald Trump and Chinese President Xi Jinping in November.
The dollar index was 0.6 basis point over the session, last at 96.133.
Traders are also preparing for the release of U.S. Federal Reserve policy meeting minutes on Wednesday and an annual Jackson Hole symposium for insights into the likely direction of U.S. monetary policy.
The Turkish lira snapped a three-day rebound on Friday, sliding more than 5 percent against the dollar on fears the United States would impose further economic sanctions unless Turkey handed over detained American pastor Andrew Brunson.
On Monday, the lira fell 1.5 percent, pushed lower after S&P Global and Moody’s downgraded the country’s sovereign credit rating further into junk territory. (Reporting by Kate Duguid and Tommy Wilkes; editing by Jonathan Oatis)