FOREX-Dollar holds steady, markets edgy ahead of Trump-Xi talks at G20

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Focus shifts to U.S.-China at G20
* Some optimism on deal to avert trade war escalation
* Euro on holding pattern before consumer price data

By Stanley White
TOKYO, June 28 (Reuters) - The dollar trod water early on
Friday as investors awaited a crucial meeting between the
leaders of the United States and China at a Group of 20 summit
over the weekend for any signs of progress to end their heated
trade war.
The mood improved the previous day after the South China
Morning Post said Washington and Beijing were laying out an
agreement that would help avert the next round of tariffs on an
additional $300 billion of Chinese imports. Negotiations between the world's two largest economies have
been fraught, so traders and analysts caution that a resolution
at the G20 summit is far from certain. Yet, markets seem to
cling on to hopes of progress in a meeting between U.S.
President Donald Trump and Chinese President Xi Jinping at the
G20 in the western Japanese city of Osaka.
That was reflected in an easing of risk aversion as U.S.
stocks gained and Treasury yields shifted lower.
Trump is set to hold the much-anticipated trade talks with
Xi at 11:30 a.m. (0230 GMT) on Saturday.
"Market moves show there is less concern about the
U.S.-China meeting, but the results of the meeting have to match
these expectations for the dollar and risk assets to go higher,"
said Junichi Ishikawa, senior foreign exchange strategist at IG
Securities.
"Anything less than that will lead to a big reaction in the
opposite direction."
The dollar traded at 107.73 yen JPY= , little changed on
the day but on course for a 0.4% gain this week as the greenback
mounted a recovery from a five-month low of 106.77 yen reached
on Tuesday.
The dollar index .DXY , which measures the U.S. currency
against six of its peers, was at 96.195, down 0.3% on the week.
The United States and China have already imposed tariffs of
up to 25% on hundreds of billions of dollars of each other's
goods in a dispute about China's trade practices that has lasted
nearly a year.
The drawn out trade war has slowed global growth and pushed
many central banks toward cutting interest rates to support
their economies. Any sign the trade war will come to an end
would be a significant boost for the global economic outlook.
The euro EUR= last traded at $1.1370, unchanged on the
week. However, analysts say sentiment on the single currency
remains weak due to speculation the European Central Bank will
ease monetary policy.
Any weakness in June inflation data for the euro zone, set
for release later on Friday, would support the argument for
monetary easing. In May, core inflation decelerated sharply.
Sterling was unchanged at $1.2670, on course for a 0.6%
weekly decline on uncertainty about who will be Britain's next
prime minister and on worries about whether the nation would be
able to avoid a no-deal, chaotic exit from the European Union.