* Dollar sags, Trump’s comments on Fed hikes continue to weigh
* U.S.-China trade talks later in session awaited for cues
* Pound stands tall amid optimism towards Brexit talks
By Shinichi Saoshiro
TOKYO, Aug 22 (Reuters) - The dollar sagged on Wednesday, as U.S. President Donald Trump’s comments on monetary policy continued to weigh on the greenback and markets awaited U.S.-China trade talks and Federal Reserve minutes for directional cues.
Noticeable gainers against the dollar included the euro, which rose roughly 0.8 percent overnight, brushing a 12-day peak of $1.1601. It was little changed at $1.1572 in early Asian trade from its New York close.
President Trump told Reuters in an interview on Monday that he was “not thrilled” at the Fed’s rate hikes, sparking the dollar’s latest downturn.
“The euro was already regrouping from its recent rout and Trump’s comments gave extra incentive for short positions to be covered in the market,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
The euro had stooped to a 13-1/2 month low of $1.1301 a week ago, hit by concerns that financial turmoil in Turkey could negatively affect European banks.
The single currency has since rebounded as the United States and China agreed to hold low-level trade talks, calming market nerves and reducing demand for the safe-haven dollar.
The U.S.-China trade talks are due to begin later on Wednesday in Washington.
“Market expectations may have exceeded the likely outcome from the trade talks, especially equities, which have gained significantly. The talks could end with little fanfare as they will not be conducted at a high level,” Ishikawa at IG Securities said.
The benchmark S&P 500 touched a record high on Tuesday and equalled its longest-ever bull-market run, buoyed by strong earnings reports in the consumer sector and relative calm in the trade dispute between the United States and China.
The dollar index against a basket of six major currencies was a shade lower at 95.211 after losing 0.7 percent the previous day. It fell to 95.070 on Tuesday, its lowest since Aug. 9.
The pound was steady at $1.2904 and in close reach of the two-week high of $1.2924 scaled the previous day.
Sterling surged 0.8 percent on Tuesday after Britain’s chief Brexit negotiator, Dominic Raab, said the country is still confident it can reach an exit deal with the European Union in October.
The Australian dollar dipped 0.1 percent to $0.7326 after advancing 0.4 percent overnight on the back of the dollar’s broad weakness.
Offshore Chinese yuan was a touch weaker at 6.832 per dollar after gaining 0.1 percent the previous day.
The dollar was down 0.25 percent at 110.06 yen. It had weakened to 109.775 overnight, its lowest since late June. (Editing by Sam Holmes)