FOREX-Euro relief as U.S.-China trade deal hopes hit dollar

* Chinese yuan still below 7 vs dollar
* Sign traders still nervous about U.S.-China trade deal
* Sterling stronger on predictions of Conservative win
* PM Johnson says candidates would back Brexit deal
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates prices, adds chart)
By Olga Cotaga
LONDON, Nov 18 (Reuters) - The euro jumped to an 11-day high
against the U.S. dollar on Monday, driven by expectations that
Washington and Beijing can soon sign off on a deal to end a
damaging trade war.
Europe's export-oriented economy has suffered from the 16
month long dispute between the world's two largest economies,
which has taken a toll on global manufacturing.
Chinese state news agency Xinhua reported on Sunday that the
two sides had "constructive talks" over the weekend. "Market participants remain optimistic that a partial
U.S.-China trade deal will be signed soon and have welcomed
tentative signs of economic improvement outside of the U.S.,
especially in the euro zone, both of which are eroding the
relative appeal of the U.S. dollar," Lee Hardman, currency
analyst at MUFG, said.
European equities have seen inflows of $3 billion over the
past two weeks, ending a record run of 85 weeks of persistent
outflows, EPFR data showed last week.
The euro was up 0.1% at $1.1060 EUR=EBS , having earlier
reached $1.1068, its highest since Nov. 7. The index which
tracks the greenback against six major currencies was flat at
97.95 .DXY after easing to an earlier low of 97.82.
Hedge funds have increased their short positions on the U.S.
currency slightly in the week to Nov. 12, CFTC data showed on
Refinitiv NETUSDG10= .
Against the Japanese yen, however, the dollar was stronger
by 0.3% at 109.05 JPY=EBS .
The offshore Chinese yuan, however, remained below 7 per
dollar, last falling 0.2% to 7.0175 CNH=EBS . The yuan is the
most sensitive currency to the trade dispute.
"Dollar/yuan above 7 suggests that the market is not yet
convinced a solution is near," said Marshall Gittler Chief
Strategist at FX analysis firm ACLS Global.
The liveliest mover was the pound, up 0.5% against the
dollar to $1.2966 GBP=D3 and rising against the euro to 85.30
pence EURGBP=D3 . It has surged to a four-week high of $1.2985
versus the dollar and a six-month high of 85.22 pence versus the
European common currency.
Sterling was boosted by expectations that the Conservative
(Tory) Party could win a majority in the Dec. 12 election.
It was also supported by British Prime Minister Boris
Johnson saying that all Tory candidates in the election have
pledged to back his Brexit deal, which could open the door to
getting the agreement through parliament. Johnson's Conservatives have a 14 point lead over the
opposition Labour Party, a poll published on Monday by Good
Morning Britain showed. "Anyone firmly believing in a Tory victory can expect
further potential in sterling," said Commerzbank analysts in a
note to clients, though they added that "the FX market is still
quite sceptical" about a Tory win.

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Speculators increase short dollar positions https://tmsnrt.rs/2r6Ay2V
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