* G20 summit kicks off in Argentina on Friday
* Trump, Xi expected to meet Saturday
* Any easing of trade tensions to weigh on dollar
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Dhara Ranasinghe
LONDON, Nov 30 (Reuters) - The dollar was a tad firmer on Friday as markets nervously awaited the outcome of talks between the leaders of the world’s two biggest economies this weekend which could determine whether trade tensions between them will escalate further.
The talks could also set the tone for the outlook of the safe-haven U.S. currency, which has gained more than 5 percent against its rivals this year on concerns that rising trade tensions will hurt world economic growth.
U.S. President Donald Trump and China’s President Xi Jinping are expected to meet at a G20 summit in Buenos Aires which kicks off on Friday, discussing contentious trade matters which could also impact currencies such as the trade-sensitive Australian and New Zealand dollars.
In early London trade, the euro fetched $1.13780, down 0.15 percent. The dollar was also flat at 113.45 yen .
“The talk was that there could be a meeting in Washington at some point in the future on trade and we think the noise that comes out of the G20 this weekend will be positive enough for that meeting to go ahead,” said Adam Cole, chief currency strategist at RBC Capital Markets in London.
“And markets are likely to take that well in terms of risk appetite and global growth expectations.”
Data on Friday showing growth in China’s vast manufacturing sector stalled for the first time in over two years in November as new orders slowed piled pressure on Beijing ahead of the Trump-Xi meeting this weekend.
Trump has said he plans to significantly increase the existing 10 percent tariffs on Chinese imports by January next year, which would sharply escalate the trade war between the economic heavyweights and shave nearly a percentage point off global growth in 2019, according to economists.
The dollar index was a touch firmer at 96.86 — off almost one-week lows at 96.626 hit on Thursday after comments this week from Federal Reserve chief Jerome Powell which prompted investors to question whether the U.S. central bank is nearing the end of its rate-hiking cycle.
A scaling back of U.S. rate expectations in recent weeks leaves the dollar index, which measures the value of the greenback against a basket of other major currencies, down 0.3 percent in November and set for the biggest monthly fall since March.
Financial markets are now pricing in only one rate hike after December’s interest rate increase next year, below the Fed’s projection of three increases over the same period.
“We believe that Powell has not turned dovish but simply toning down his hawkish tilt. We expect a Fed hike in December and the U.S. economy to keep performing and support another four hikes in 2019,” said Philip Wee, currency strategist at DBS in a note.
Elsewhere, there was also focus on whether OPEC and Russia agree on oil production cuts next week.
A meaningful rebound in crude prices can be beneficial for commodity currencies such as the Canadian dollar and Norwegian krone, said Michael McCarthy, chief markets strategist at CMC Markets. (Reporting by Dhara Ranasinghe; Additional reporting by Vatsal Srivastava in SINGAPORE Editing by Raissa Kasolowsky)