* FX markets still broadly long dollars
* Sterling tanks on Brexit talk concerns, PMI data
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Sept 3 (Reuters) - The dollar consolidated near a one-week high against a basket of currencies on Monday as tensions around global trade negotiations fuelled demand for the greenback, though concerns about capital flows checked gains.
U.S. President Donald Trump said on Saturday there was no need to keep Canada in the North American Free Trade Agreement (NAFTA) and warned Congress not to meddle with the talks to revamp NAFTA or he would terminate the trilateral pact altogether.
“Trade tensions are broadly supporting the dollar, but the market is hardly very conducive of risk,” said Viraj Patel, an FX strategist at ING in London.
Traders bought the dollar against the British pound and the Canadian dollar. The dollar’s status as the chief reserve currency makes the U.S. currency the primary beneficiary of concern over trade conflicts.
However, gains were limited as analysts pointed out that the quality of capital inflows into U.S. assets has worsened noticeably in recent weeks, suggesting the dollar’s rise may be short-lived.
“The quality of longer-term sticky flows into the dollar has started to weaken noticeably and we believe the dollar’s gains may be coming to a close,” said Hans Redeker, global head of foreign exchange strategy at Morgan Stanley based in London.
The dollar edged up 0.1 percent to 95.22 against a basket of major currencies, nearing its highest level since Aug. 27. It has gained nearly 7 percent since mid-April when trade tensions first arose.
On a positioning basis, markets remained firmly in the stronger dollar camp with net outstanding positions holding near their highest levels since January 2017.
Still, gains were muted and safe-havens such as the Swiss franc and the Japanese yen were supported against higher-yielding currencies.
The euro was on the back foot against the dollar after data showed euro zone manufacturing growth slowed to a near two-year low in August as optimism dwindled amid growing fears of an escalating global trade war.
Sterling was the standout loser of the day as new concerns about Brexit negotiations and weak UK manufacturing data combined to push the British currency down 0.8 percent.
Michel Barnier, the European Union’s chief Brexit negotiator, said he was “strongly opposed” to the British government’s proposals on future trade ties after it leaves the EU.
The pound fell 0.8 percent to $1.2855 and weakened 0.8 percent against the euro to 89.80 pence.
Reporting by Saikat Chatterjee; Editing by Susan Fenton