* Dollar slips
* Euro trades at $1.1850
* Commodity currencies stronger
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Ritvik Carvalho
LONDON, Aug 17 (Reuters) - The dollar edged lower and
commodity currencies inched higher on Monday as investors were
relieved by a delay in a review of the U.S.-China trade pact
which left the deal intact.
Uncertainty ahead of a week that includes minutes of the
U.S. Federal Reserve's last policy meeting and the U.S.
Democratic Party's nomination convention kept a lid on
sentiment, with limited moves by midday in London.
Against a basket of currencies =USD the dollar traded 0.1%
lower at 92.982, roughly in the middle of the range it has held
since dropping to a two-year low in late July.
The risk-sensitive Australian dollar AUD=D3 inched up to a
week high of $0.7196, poking around the top end of a channel it
has traded in for a week. The oil-sensitive Canadian dollar
CAD=D3 also edged 0.3% higher to C$1.3224 per greenback.
The United States and China postponed a Saturday review of
their Phase 1 trade deal, people familiar with the plans told
Reuters, citing scheduling conflicts. The euro traded higher by 0.1% against the dollar at $1.1850
EUR=EBS .
Analysts point to stretched long positioning on the euro,
U.S. politics as a presidential election looms, and new
coronavirus hotspots in Europe as factors that could challenge
the euro's uptrend.
"Positioning remains stretched on longs, making the cross
vulnerable to a turn in sentiment, which has for a while been
that of the EU handling the COVID shock better than the U.S.;
this may change as U.S. figures peak and Europe fights the
second wave," said Arne Lohmann Rasmussen, Chief Analyst, Head
of Cross-Scandi Research at Danske Bank, in a note to clients.
Danske sees the euro/dollar rate hitting $1.16 a month from
now, he added.
Markets are also looking to the Fed minutes from last
month's meeting, due to be released on Wednesday, for any clues
about an anticipated shift in the policy outlook.
Speculation is rife the U.S. central bank will adopt an
average inflation target, which would seek to push inflation
above 2% for some time to make up for the years it has run
below.
"The outlook for the dollar will likely be driven by the
U.S. bond market this week," said Viraj Patel, global FX and
macro strategist at Arkera.
"U.S. real yields are around 14bps since 06 Aug - the
question is whether we continue to see a bond market sell-off
that supports dollar crosses against high-beta risky
currencies."
The yield on benchmark 10-year U.S. debt rose almost 15
basis points last week, its sharpest weekly rise in two months,
which weighed on the yen by attracting investment from Japan.
U.S. 10-year yields US10YT=RR slipped to 0.6882% on
Monday, while the yen was a tad firmer at 106.51 per dollar.
DIVERGENCE
Data releases across Asia on Monday painted a bleak picture,
with currency investors unmoved by a couple of bright spots.
Japan was hit by its biggest economic contraction on record
in the second quarter and Thailand suffered its worst quarter in
22 years as the coronavirus battered exports and activity.
Thailand's contraction was a little better than market
expectations, but that failed to lift the baht.
The next noteworthy release is the New York Fed's Empire
manufacturing survey, due at 1230 GMT. It is expected to show a
slight pullback in conditions, and a surprise either way could
challenge the market belief that the economic fortunes of Europe
and the United States are diverging.
Sterling GBP= rose above the $1.31 mark.
The other area where a divergence is emerging is the
Antipodes, where anticipation of the Reserve Bank of New Zealand
taking rates negative next year is weighing on the kiwi.
New Zealand delayed a general election by a month on Monday
as it grapples with a new outbreak of the coronavirus in
Auckland.
The kiwi dipped 0.1% on the dollar to $0.6531 NZD= .