November 30, 2018 / 2:40 PM / 10 months ago

FOREX-Dollar higher as trade talks between U.S. and China take focus

    * U.S. China due to discuss trade matters on Saturday
    * Investors expect higher volatility after trade talks

 (New throughout, updates trading, adds comments to U.S. market
open, previous LONDON)
    By Karen Brettell
    NEW YORK, Nov 30 (Reuters) - The dollar edged higher on
Friday as investors prepared for the fallout from trade talks
between the United States and China at the G20 meeting on
Saturday, which investors expect will increase volatility across
    U.S. President Donald Trump sent mixed signals on Thursday
about the prospects for a trade deal with China, saying an
agreement was close but he was not sure he wanted one, just as
he left for Argentina for a meeting with President Xi Jinping.

    Trade Representative Robert Lighthizer said on Friday he
would be surprised if Saturday's dinner between Trump and
Jinping "wasn't a success."
    “For now, really, the trade issue seems to be a dominant
theme swaying sentiment,” said Mazen Issa, senior FX strategist
at TD Securities in New York. “If you have any sort of news or
headlines that is indicative of a positive or negative outcome,
I think markets are going to react accordingly.”
     The dollar index gained 0.26 percent to 97.027. The
Chinese yuan weakened 0.08 percent to 6.95 per dollar. 
    Credit Suisse strategists expect the Chinese currency to
weaken to a decade low of 7.20 per dollar by end-2019.
    Data on Friday showed growth in China's vast manufacturing
sector stalled for the first time in over two years in November
as new orders slowed, piling pressure on Beijing ahead of the
trade talk.
    Investors are also continuing to evaluate comments by
Federal Reserve Chairman Jerome Powell on Wednesday that the
U.S. central bank's policy rate is now "just below" neutral, a
level that neither brakes nor boosts a healthy U.S. economy.

    The immediate reaction sent the dollar tumbling as investors
saw the Fed as likely to end its hiking cycle sooner than
previously expected.
    Interest rate futures traders are now pricing for only one
rate hike in 2019, according to the CME Group’s FedWatch Tool,
below Fed projections of three increases during the year.
    Some analysts see the move as exaggerated, however, with the
Fed more likely to let economic data guide it on when to pause
    "There's no denying that the Fed rhetoric has changed in
recent weeks, but we don't think it's changed quite as much as
the repricing in rates suggests it has," said Adam Cole, chief
currency strategist at RBC Capital Markets in London.
    Currency bid prices at 9:30AM (1430 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1353        $1.1391     -0.33%         -5.36%      +1.1400     +1.1354
 Dollar/Yen       JPY=        113.5000       113.4700    +0.03%         +0.74%      +113.5700   +113.3400
 Euro/Yen         EURJPY=     128.88         129.28      -0.31%         -4.66%      +129.3000   +128.8800
 Dollar/Swiss     CHF=        0.9983         0.9957      +0.26%         +2.46%      +0.9987     +0.9952
 Sterling/Dollar  GBP=        1.2751         1.2792      -0.32%         -5.63%      +1.2809     +1.2746
 Dollar/Canadian  CAD=        1.3312         1.3281      +0.23%         +5.84%      +1.3324     +1.3272
 Australian/Doll  AUD=        0.7307         0.7318      -0.15%         -6.33%      +0.7326     +0.7295
 Euro/Swiss       EURCHF=     1.1335         1.1344      -0.08%         -3.03%      +1.1358     +1.1322
 Euro/Sterling    EURGBP=     0.8901         0.8908      -0.08%         +0.20%      +0.8925     +0.8890
 NZ               NZD=        0.6867         0.6857      +0.15%         -3.09%      +0.6878     +0.6856
 Dollar/Norway    NOK=        8.5745         8.5347      +0.47%         +4.48%      +8.5771     +8.5279
 Euro/Norway      EURNOK=     9.7380         9.7243      +0.14%         -1.12%      +9.7468     +9.7170
 Dollar/Sweden    SEK=        9.0898         9.0648      -0.07%         +10.83%     +9.1000     +9.0635
 Euro/Sweden      EURSEK=     10.3219        10.3290     -0.07%         +4.92%      +10.3483    +10.3160

 (Additional reporting by Dhara Ranasinghe in London; editing by
Jonathan Oatis)
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