FOREX-Dollar holds near 2-1/2-mth yen high on U.S.-China partial deal, pound stands tall

* U.S., China strike partial trade deal; risk appetite
returns
* EU, Britain to hold intense negotiations on Brexit deal
* Dollar near 2 1/2-month high vs yen, 3 1/2-month low vs
sterling
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tomo Uetake
SYDNEY, Oct 14 (Reuters) - The dollar held near a 2
1/2-month high against the yen on Monday after Washington and
Beijing announced progress towards a trade deal, while sterling
hovered near a three-month peak on hopes for an orderly British
exit from the European Union.
On Friday, the dollar strengthened against the safe-haven
yen to as much as 108.63 yen JPY= , its highest level since
August 1, before U.S. President Donald Trump said the United
States and China had reached a 'Phase 1' trade deal.
It pared those gains after Trump announced the agreement,
covering agriculture, currency and some aspects of intellectual
property protections. In early Asian trade on Monday, the dollar inched down to
108.36 yen against the yen, while the euro stood at $1.1025
EUR= versus the greenback, off Friday's three-week high of
$1.10625.
Tokyo's market is closed for a public holiday on Monday, so
trading volumes are likely to lighter than usual.
The trade deal "looks more symbolic than substantial, and
might be better described as simply an 'interim trade war
truce,'" said Ray Attrill, head of FX strategy at National
Australia Bank.
"This Phase 1 agreement, if inked, does little to
immediately brighten the outlook for global trade and growth.
While it shouldn't prevent the Fed from agreeing to cut rates by
another quarter point on Oct. 30, it doesn't provide a firm
pretext for significant or sustained U.S. dollar depreciation."
The deal represents the biggest step between the United
States and China in a 15-month trade dispute. Friday's
announcement did not include many details and Trump said it
could take up to five weeks to get a pact written. He
acknowledged the agreement could fall apart during that period,
though he expressed confidence that it would not. The British pound surged on Friday to as high as $1.2708
GBP=D4 , its strongest level since July 1, and a five-month
peak of 86.955 pence per euro EURGBP=D4 , on optimism about
orderly Brexit.
The pound was last down 0.38% at $1.2600 in Asia.
The EU agreed on Friday to hold another round of intense
negotiations with London in a bid to break the deadlock and
secure a deal before the Oct. 31 deadline. EU negotiator Michel Barnier and his British counterpart
Stephen Barclay earlier held what both sides called a
"constructive" meeting in Brussels. The British and Irish prime
ministers said on Thursday they had found "a pathway" to a
possible deal, and by Friday some officials were expressing
guarded optimism.
On Sunday, British Prime Minister Boris Johnson told his
cabinet a last-minute deal was still possible as the two sides
pressed on with intensive talks to try to avoid a disorderly
Brexit on Oct. 31. Britain said there would be more talks on Monday, with
Johnson hoping a deal will be agreed in time for EU leaders to
approve it at a summit in Brussels on Thursday and Friday this
week.
But he will still have to convince a deeply divided British
parliament to ratify the agreement, while the European
Commission said "a lot of work remains to be done" in a
statement issued late on Sunday.