Dollar firms on hopes for US-China trade talks, pound steadies

NEW YORK: The dollar edged higher against a basket of currencies on Tuesday, hovering near a two-week high, as China and the United States laid out a plan on the next stage of their trade talks to avert a trade war between the world's two biggest economies.

The sterling bounced up from 20-month lows as Prime Minister Theresa May sought support from European leaders to change her Brexit deal, with investors weighing chances of a chaotic British exit from the European Union.

"The prospects for US and China have brightened. That's a relief for the dollar," said Peter Ng, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California.

White House officials and China's commerce ministry said Chinese Vice Premier Liu He, US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer spoke on a telephone call on Tuesday, but offered no details what they discussed.

Still the call was seen as a step to ratchet down trade tension between Beijing and Washington, analysts said.

Investors fear an all-out trade war between the two nations would hurt global economic growth, which is already showing signs of losing momentum.

At 10:37 a.m. (1537 GMT), an index that tracks the greenback against six major peers was up 0.13 percent at 97.346. Earlier Tuesday, it touched 97.354, which was the highest since Nov. 28.

The dollar's gains have been limited by the recent decline in US bond yields stemming from worries about weakening global growth, a pickup in market volatility and bets the Federal Reserve may pause with its rate increases sooner than previously thought.

Positioning data released late Monday suggested the dollar may fall as speculators increased their net long bets in the greenback to their highest level since December 2016.

The sterling steadied following steep losses on Monday in reaction to May cancelling a parliamentary vote on her Brexit agreement to seek more concessions.

Traders weighed possible outcomes for Britain and its relationship with the European Union. They include a disorderly no-deal Brexit, another referendum on EU membership, or a last-minute renegotiation of May's deal with Brussels.

The sterling was up 0.02 percent at $1.2562 after falling to $1.2507 on Monday which was the lowest since April 2017.

The euro slipped 0.29 percent at 90.135 pence after reaching 90.875 pence, which was its strongest since Aug. 28.

The single currency was also bogged down by concerns over protests in France against inequality and President Emmanuel Macron's economic reforms.

Investors were also focused on the European Central Bank's economic assessment of the euro zone, due on Thursday.

The euro was 0.29 percent lower at $1.1322 and down 0.36 percent at 128.29 yen.