FOREX-Dollar dips as spotlight remains firmly on U.S./China trade

* Dollar index edged closer to recent two-week lows
* Trade war headlines continue to hog market spotlight
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Dhara Ranasinghe
LONDON, Nov 21 (Reuters) - The dollar was a touch weaker
against other major currencies on Thursday, with investors
fixated on the latest developments in a bitter 16-month long
trade dispute between the United States and China that has dealt
a blow to the world economy.
China has invited top U.S. trade negotiators for a new round
of face-to-face talks in Beijing amid continued efforts to
strike at least a limited deal, the Wall Street Journal reported
on Thursday, citing unnamed sources. This week has seen a hardening of rhetoric from both sides,
prompting investors to scale back optimism that a so-called
"phase one" agreement could be signed soon.
The greenback, which has behaved as a safe-haven currency
for most of this year, edged up on Wednesday after a report that
a deal could be postponed till next year.
At 1120 GMT, the dollar index, which measures the dollar's
value against a basket of currencies, was down 0.1% at 97.82 --
nearing two-week lows hit on Monday of around 97.68 .DXY .
It was 0.1% softer versus the euro on the day at $1.10835
EUR=EBS and 0.15% weaker against sterling at $1.2940 GBP=D3 .
"We're really just waiting to see what happens on the trade
front," said Stephen Gallo, European head of currency strategy
at BMO Financial Group in London.
"The shift in sentiment is warranted, a lot of good news had
been in the price and some of that has been taken out."
Gallo said the outlook for the dollar had not shifted that
much moving into 2020, with currency markets likely to remain
beholden to trade, Brexit and political headlines.
Strategists at Citigroup expect the dollar index to weaken by
more than 2% over the next year to around 94.
For others, a pause in U.S. Federal Reserve interest-rate
cuts was positive for the dollar outlook.
"Over the past year or so there have been times where
negative headlines on trade have been negative for the dollar
because they have reinforced Fed easing expectations," said
Fritz Louw, a currency strategist at MUFG.
"But if you don't expect the Fed to cut rates further, the
negative trade sentiment impact would probably drive the dollar
a bit higher from a safe-haven perspective."
Minutes released on Wednesday showed that the Fed, which hit
pause in its easing cycle following a rate cut in October, is in
no hurry to reassess the path of interest rates. The European Central Bank will release the minutes from its
October meeting later on Thursday, with little significant
impact on the euro expected.
Against the yen, the dollar was steady at around 108.60
JPY=EBS with the Japanese currency supported by renewed trade
war jitters.
The passage of a U.S. law supporting anti-government
protesters in Hong Kong has added to concern that a trade deal
may not be reached soon, bolstering safe-haven assets.
China's yuan CNY=CFXS fell in the onshore market to 7.0450
versus the dollar, the weakest since Nov. 1, before steadying at
7.0320. Offshore, the yuan CNH=D3 slipped to 7.0533 per
dollar, the lowest since Nov. 5, before recovering its losses.

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