By Tom Westbrook
SINGAPORE (Reuters) – The dollar found support on Tuesday while investors waited for an outcome from Sino-U.S. trade talks in Washington, with caution the catchcry as neither side showed any signs of giving ground at the negotiations.
The greenback had gained overnight as risk aversion, and low expectations for a breakthrough trade deal, drove trade-exposed currencies such as the Australian and New Zealand dollars, the and Korean won lower.
The dollar mostly held those gains Asian morning trade, but moves were slight as currency markets find themselves in a holding pattern. Traders are looking to news from the discussions, and a Chinese service-sector survey, due out at 0145 GMT, to drive sentiment.
“No-one can be confident about these talks, except our inclination has long been that the talks are more likely to disappoint than to please market expectations,” said Sean Callow, currency strategist at Westpac in Sydney.
“The U.S. and China are just too far apart on key issues,” he said, leaving only a very limited deal in prospect.
The dollar retreated marginally from a week-high touched on the Japanese yen overnight to sit at 107.30 yen . It edged lower on the euro () to steady around $1.0971 as the single currency slowly climbs from a 2-1/2 year low hit last week.
It was flat against the Australian dollar at $0.6728 and steady against the New Zealand dollar at $0.6286. Against a basket of currencies () the dollar steadied at 98.976.
The Chinese yuan, the most sensitive currency to the trade negotiations, was flat in offshore trade at 7.1330 per dollar , with onshore trade to resume at 0130 GMT after a week-long break for China’s national day holidays.
Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
Deputy-level meetings between U.S. and Chinese trade negotiators began in Washington on Monday, with little immediate signs of progress.
Top-level talks are scheduled to resume on Thursday, when Chinese Vice Premier Liu He meets with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
The talks are getting underway about a week before a scheduled increase in U.S. tariffs on $250 billion worth of Chinese goods, to 30% from 25%.
U.S. President Donald Trump has said the tariff increase will take effect if no progress is made in the negotiations. The U.S. also added another 28 Chinese public security bureaus and companies to a trade blacklist on Monday.
“It seems the best we can hope for this week is for a truce to continue and for Trump to extend the deadline for the next lift in tariffs,” said Tapas Strickland, an economist at National Australia Bank in Sydney.Sterling slipped slightly as investors grow increasingly concerned about a lack of progress between Britain and the European Union to agree a Brexit withdrawal deal. Sterling last traded at $1.2287 per pound.
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