FOREX-Dollar treads water as U.S.-China trade talks continue; pound slips

* Top U.S. and Chinese trade negotiators hold phone call,
discuss
core issues
* Sterling weakens after polls show Conservative lead is
narrowing

(New throughout, updates rates, adds comments post-U.S. market
open; new byline, changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Nov 26 (Reuters) - The U.S. dollar was little
changed against a basket of currencies on Tuesday as traders
looked to the latest developments in the U.S.-China trade talks
for direction and the shortened holiday week kept currency moves
muted.
Chinese Vice Premier Liu He, U.S. Trade representative
Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin
discussed issues related to phase one of a trade agreement and
agreed to maintain communication on remaining issues.
Separately, the Global Times, a tabloid run by the ruling
Communist Party's official People's Daily, reported on Sunday
that China and the United States are "moving closer to agreeing"
on a "phase one" trade deal, even as Washington and Beijing had
not agreed on specifics or size of rollbacks of tariffs on
Chinese goods.
"Does this tell us anything we didn't know six, seven weeks
ago? Hard to say. But I'll believe when I see it," said Neil
Wilson, chief market analyst at Markets.com.
The United States has imposed tariffs on Chinese goods in a
16-month long dispute over trade practices that the U.S.
government says are unfair. China has responded in kind with its
own tariffs on U.S. goods.
If both sides cannot reach an agreement soon, the next
important date to watch is Dec. 15, when Washington is scheduled
to impose even more tariffs on Chinese goods.
On Tuesday, data showed the U.S. goods trade deficit fell
sharply in October as both exports and imports declined,
pointing to a continued reduction in trade flows that has been
blamed on the Trump administration' "America First"
policy. The dollar index .DXY , which compares the greenback
against six other major currencies, was up 0.02% at 98.339.
"Near-term escalation appears to be off the table, for the
time being, despite Trump's threats to raise tariffs if there is
no agreement," said Marc Chandler, chief market strategist at
Bannockburn Global Forex.
"However, the fundamental disagreement is illustrated by Xi
arguing for an equal deal while Trump claims that because China
already has a large advantage, an agreement must favor the
U.S.," he said.
Against the yen, the dollar was up 0.15%. The U.S. currency
had jumped to a two-week high against the safe-haven Japanese
yen in Asian trading.
Overall, currency trading is slowing before the U.S.
Thanksgiving holiday on Thursday, with traders increasingly
pricing in tighter trading ranges for major currencies, analysts
said.
Sterling was 0.4% lower at $1.2846 on Tuesday after a second
poll showed the Conservative Party's lead is narrowing before
the British election next month. Prime Minister Boris Johnson's Conservatives have led the
opposition Labour Party, and hopes that a Johnson victory would
end more than three years of uncertainty over Brexit have lifted
the pound, despite concern about a no-deal exit from the
European Union.

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