October 28, 2019 / 9:29 AM / 15 days ago

FOREX-Dollar off one-week highs on trade hopes; long dollar positions cut

* Dollar flat ahead of Fed meeting on Wednesday

* EU leaders expected to grant Brexit extension on Monday or Tuesday

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

By Elizabeth Howcroft

Oct 28 (Reuters) - The dollar slipped on Monday off one-week highs against a basket of currencies as hopes of a Sino-American trade-deal encouraged a move away from safe-haven assets and focus grew on slowing U.S. economic momentum.

The greenback held on to most of the gains from last week when it rose 0.5%, easing 0.06% after news on Saturday that the U.S. and China are “close to finalizing” some parts of a trade agreement.

In a possible sign of waning dollar bullishness, speculators slashed their long-held long dollar positions to $15.31 billion as of Oct. 22, versus $20.79 billion the previous week, according to calculations by Reuters and the U.S. Commodity Futures Trading Commission.

This is the smallest long position since Sept. 17.

The dollar was up 0.1% against the offshore yuan, to its strongest levels in more than six weeks, while the onshore yuan saw its strongest close in ten weeks. .

Investors are focused on the U.S. Federal Reserve meeting on Wednesday, when policymakers are expected to cut interest rates - a move which is already priced in.

“The U.S. economy will come straight back on to the top of the agenda, dovetailing into that is the expectation that there could be a trade deal this month,” said Jane Foley, senior FX strategist at Rabobank.

“There’s still an awful lot of discrepancy and uncertainty in the markets as to what the Fed will do next year,” she said, adding that “the market will be looking for clues as to which way that might go”.

MUFG currency analyst Lee Hardman said market participants expect rates to be cut by 25 basis points.

“It is now seen as more likely to be the last rate cut delivered this year,” he wrote in a note.

The euro was broadly firmer, up 0.1% against the dollar and 0.2% against the yen, while the pound was up 0.1% at $1.2848 ahead of the EU’s decision on a new Brexit deadline, expected on Monday.

“The outlook for the euro has improved along with expectations for a trade deal and a Brexit deal,” Foley said, noting that a Brexit deal would be not only good for both the UK and eurozone economy.

The European Central Bank’s outgoing president, Mario Draghi, will speak in Frankfurt on Monday.

In a busy week for central banks, investors will also watch the Bank of Japan’s policy decision on Thursday, which is expected to be a close call on whether to unleash more stimulus or hold fire for now.

Reporting by Elizabeth Howcroft; Editing by Giles Elgood

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