FOREX-Cautious trade optimism boosts kiwi, Aussie; Fed awaited

(Updates prices)
* Optimism on trade as investors hope for Sino-U.S. progress
* Dollar holds overnight gains on yen, Aussie supported
* Fed cut expected, rhetoric to set tone
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Westbrook
HONG KONG, Oct 29 (Reuters) - Hopes for an easing in
Sino-U.S. tensions buoyed trade-exposed Asian currencies on
Tuesday, while growing expectations the U.S. Federal Reserve
could take a wait-and-see approach to further easing underpinned
the dollar.
Most moves were modest, though, as caution tempered the
mood. The Australian and New Zealand dollars each rose nearly
0.3%. The safe-haven currencies of the Japanese yen and Swiss
franc each eased very slightly.
"Global risks remain but have shown signs of subsiding,"
Philip Wee, FX strategist at Singapore's DBS Bank said in a
note.
"China-U.S. trade tensions have stopped escalating ... the
Fed has reasons to sound less dovish on a 'half-full' narrative
for the U.S. economy."
U.S. President Donald Trump had said a trade agreement
looked to be ahead of schedule on Monday, without detailing the
timing. The United States also said it was studying whether to
extend tariff suspensions due to expire in December.
That followed remarks late last week from both U.S. and
Chinese officials saying they were "close to finalising" a deal,
driving equities and bond yields higher on Monday. The appetite
for risk remained on Tuesday.
The Aussie AUD=D3 hit its highest since Wednesday,
touching $0.6859, while the greenback held on to its overnight
progress against the yen JPY= to stand at 108.97 yen per
dollar, just below a three-month high.
China's central bank lifted its official yuan midpoint to
the highest level in over two months on Tuesday, and the
currency CNY= edged higher to 7.0564 per dollar.
The dollar was a little softer against the euro EUR= at
$1.1090 and a little stronger against of currencies .DXY at
97.813.
Beyond the trade headlines, the major focus this week is the
Fed meeting. The U.S. central bank is expected to cut rates for
a third time in a row when it concludes its two-day meeting on
Wednesday.
Investors are watching for any indication that further cuts
are likely, with futures pricing suggesting more easing is
expected in 2020. If that is not foreshadowed, traders expect
the dollar to rise.
"The forward guidance will be the thing," said Westpac
analyst Imre Speizer in Auckland.
"It still looks like a done deal that they will cut, but
then the risk is that they might characterise that as just one
more insurance move ... the market will have to take out the
pricing it's got for future dates."
The British pound, meanwhile, GBP= nudged lower to
$1.2855, with Brexit hanging in the balance.
The European Union has agreed to delay Britain's exit for up
to three months, but the country is politically paralysed and
overnight parliament rejected Prime Minister Boris Johnson's
third attempt to schedule a Dec. 12 election. Johnson has said he would try again, by a different
legislative route that would only require a simple majority,
rather than a two-thirds majority.