* Dollar demand ebbs as US-China trade tensions ease
* U.S. seeking new round of trade talks with China
* Turkey’s c.bank decision awaited, lira steady
* ECB, BoE widely expected to leave interest rates unchanged
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, Sept 13 (Reuters) - The dollar was firmly capped while the Chinese yuan advanced on Thursday after news that Washington was seeking a new round of trade talks with Beijing reduced safe-haven demand for the U.S. currency.
The euro and the pound held steady ahead of policy decisions by the European Central Bank and the Bank of England scheduled later in the day.
The dollar index against a basket of six major currencies was little changed at 94.795 after declining about 0.5 percent the previous day.
The greenback fell following news that the Trump administration has invited Chinese officials to restart trade talks.
“The dollar did dip on the latest trade-related headlines, but it is hard to imagine the situation improving dramatically on this meeting alone. Currencies will continue reacting to each bit of news about the U.S.-China trade conflict,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
China’s yuan rose 0.3 percent to 6.8450 per dollar in onshore trade on Wednesday on the renewed hopes for U.S.-China trade discussions, pulling back from a 2-1/2-week low of 6.8800 brushed the previous day.
The Australian dollar, seen as a liquid proxy of China-related trades as well as a barometer of risk sentiment, rose 0.3 percent to $0.7194 after surging 0.7 percent overnight.
The Aussie was given an additional lift after Thursday’s stronger-than-expected Australian employment data for August.
The pound was steady at $1.3052 after edging up 0.1 percent the previous day after Brexit-supporting lawmakers in British Prime Minister Theresa May’s party publicly pledged support for her to stay in power.
The Bank of England is expected to keep interest rates on hold on Thursday, giving the economy time to digest August’s increase in borrowing costs, which was only the second such move in the decade since the financial crisis.
“The BoE as well the ECB policy meetings today are not expected to be major market-moving events and they are not drawing too much attention. But it does remain to be seen if the BoE makes any mention of the recent Brexit talks,” said Ishizuki at Daiwa Securities.
The European Central Bank is all but certain to keep policy unaltered on Thursday, making only nuanced changes to its guidance to stay on course to end bond purchases this year and raise interest rates next autumn.
The euro edged up 0.1 percent to $1.1638 after advancing 0.2 percent overnight.
The Turkish Central Bank is expected to raise interest rates on Thursday to calm the country’s currency crisis, but forecasts for the scale of the increase vary widely as the bank balances concerns over lira weakness with worries about an economic slowdown.
“About the only consensus in the market is the vague assumption that the Turkish central bank will hike interest rates today, so we could see volatility in the market no matter what the bank does,” said Takuya Kanda, general manager at Gaitame.Com Research.
In a Reuters poll, all 11 economists predicted the benchmark one-week repo rate, now at 17.75 percent, would be raised. The average forecast was for a hike to 22 percent, but predictions ranged widely from an increase of 225 basis points to 725 basis points.
Turkey’s lira was almost flat at 6.3475 per dollar . It had slumped to a record low 7.2400 in mid-August, raising investor expectations for the country’s central bank to tighten monetary policy and arrest the currency’s slide.
Elsewhere, the dollar was nudged up 0.15 percent to 111.41 yen after losing roughly 0.4 percent the previous day. (Reporting by Shinichi Saoshiro; editing by Richard Pullin & Shri Navaratnam)