FOREX-Dollar loses momentum vs yen as trade deal, Brexit hopes face reality check

* Optimism fades as China wants more talks before inking
deal
* Sterling slips as Brexit uncertainty rules
* Lira unmoved after Washington announces sanctions on
Turkey
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tomo Uetake
SYDNEY, Oct 15 (Reuters) - The dollar hovered below
2-1/2-month highs against the yen on Tuesday, failing to extend
recent gains as optimism over trade negotiations between the
world's two largest economies and for an orderly British exit
from the European Union started to fade.
In Asian trade, the dollar eased marginally to 108.31 JPY=
against the yen, still not far from its 2-1/2-month high of
108.63 yen marked on Friday.
The euro was flat at $1.1031 EUR= versus the greenback,
off Friday's three-week high of $1.1062.
Although markets initially welcomed the "Phase 1" trade deal
between the United States and China that President Donald Trump
outlined last week, a lack of details kept many investors
cautious.
"Media reports suggest China wants another high-level
meeting later this month to finalise Friday's agreement,
suggesting that not all the details are nailed down," said Alex
Stanley, senior interest rate strategist at National Australia
Bank.
"Market participants are conscious that previous U.S.-China
'agreements' have subsequently broken down amidst
misunderstandings among the two sides."
A Bloomberg report on Monday, citing sources, said China
wants more talks as soon as the end of October to hammer out the
details of Trump's phase 1 deal before Chinese President Xi
Jinping agrees to sign it. China's yuan CNY=CFXS remained relatively firm versus the
dollar in onshore trade, a day after it hit a two-month high of
7.0494. It last traded at 7.0738 per dollar, a touch lower on
the day.
The offshore yuan CNH=D4 traded at 7.0760 against the
greenback, off Monday's one-month high of 7.0503.
Negotiations between the UK and the European Union over
Britain's exit from the bloc also looked equally fleeting.
Sterling slipped from a three-month high touched on Friday
as last week's euphoria gave way to doubts over whether a timely
Brexit deal could be clinched. The pound was last quoted at
$1.2611 GBP= versus the dollar, steady on the day.
A deal to smooth Britain's departure from the EU hung in the
balance on Monday after diplomats indicated the bloc wanted more
concessions from Prime Minister Boris Johnson and said a full
agreement was unlikely this week. Johnson says he wants to strike an exit deal at an EU summit
on Thursday and Friday to allow an orderly departure on Oct. 31.
If an agreement is not possible, he says he will lead the United
Kingdom out of the club it joined in 1973 without a deal - even
though parliament has passed a law saying he cannot do so.
The Turkish lira showed limited reaction after Trump imposed
new sanctions on Turkey, but the currency stayed near seven-week
lows against the dollar on concerns about a fallout from the
country's incursion in northern Syria. In Asian trade, the lira stood at 5.9240 per dollar
TRYTOM=D4 , almost flat on the day, after having weakened some
0.8% on Monday.
Elsewhere, the Aussie and kiwi dollars struggled for
traction on Tuesday as traders wondered what, if any, progress
was being made in Sino-U.S. negotiations, while Australian
policymakers again signalled they were ready to cut rates if
needed. The Aussie dollar AUD=D3 stood flat at $0.6773 and the New
Zealand dollar NZD=D3 was a shade firmer at $0.6302.

(
Editing by Jacqueline Wong)