* Dollar down, risk-sensitive currencies up on trade hopes
* Pound rises on retail sales, Brexit prospects (New throughout, updates rates, comments, changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Sept 20 (Reuters) - The dollar fell across the board on Thursday as a resurgence in global risk appetite on relief that new U.S. and Chinese tariffs on reciprocal imports were less harsh than feared hurt safe-haven demand for the greenback.
The dollar has been a major beneficiary of growing trade-related tensions in recent months, as investors bet it would gain at the expense of riskier currencies.
After a knee-jerk negative reaction to the new tariffs announced by Washington and Beijing this week, currency markets have become more settled, as traders say they do not expect the dispute to cause a global shock, at least for now.
With news such as recent solid U.S. economic data and a likely rate hike by the Federal Reserve next week priced in, dollar bulls are struggling for other reasons to push the greenback higher.
“Markets are realizing, at least in the short run here, there is not much more juice to squeeze out of the dollar,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
The euro advanced 0.69 percent against the greenback. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.48 percent at its lowest since early July.
Emerging market currencies strengthened on Thursday and the MSCI’s emerging market currency index climbed to a three-week high.
“With emerging markets stabilizing in recent days the dollar is not getting as much of a lift from safe-havens flows,” said Osborne.
To be sure, some market participants believe the dollar’s weakness might be fleeting.
“I don’t think this marks a new downtrend and if it does I think it will be quite short lived because rate differentials still matter and U.S. fundamentals on a relative basis are still pretty strong,” said Tim Graf, State Street Global Markets’ EMEA Head of Macro Strategy.
Next week, the Federal Reserve is expected to raise benchmark borrowing costs and shed more light on its future rate path.
Traders were also watching events at a European Union summit in Salzburg, Austria, where EU leaders warned British Prime Minister Theresa May on Thursday that she needs to give guarantees on the Irish border before they will grant her the Brexit deal she wants.
Sterling was up 0.83 percent against the dollar, boosted by optimism around the chances of a Brexit deal and forecast-beating UK retail sales data.
The Australian dollar, a proxy for China-related trades as well as a barometer of broader risk sentiment, was up 0.22 percent, near a three-week high.
The Canadian dollar edged higher against the greenback as investors awaited clues on the prospect of a deal to revamp the NAFTA trade pact.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Sujata Rao in London Editing by Susan Thomas