FOREX-Dollar hangs on as traders turn to ECB; Brexit wobbles hit sterling

* Euro softens into Thursday's ECB meeting
* Pound dumped on fresh worries about hard Brexit
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Sept 8 (Reuters) - The dollar held on to small
overnight gains on Tuesday as investors weighed whether an
accommodative turn from the European Central Bank later this
week could hit the euro, while the pound nursed losses due to
Brexit uncertainty.
In thin holiday trade the greenback had edged 0.2% higher
against a basket of currencies =USD and rose by roughly the
same margin against the euro EUR=EBS to $1.1816.
Moves early in the Asian day were modest, but had the dollar
back under gentle pressure as risk appetite appeared to return
to equity markets. MKTS/GLOB
The Australian dollar AUD=D3 rose 0.1% to $0.7280 and the
New Zealand dollar NZD=D3 also lifted very slightly from
overnight lows hit following a Sunday statement from the central
bank which again raised the prospect of negative rates. AUD/
The main focus this week is on the European Central Bank's
policy decision on Thursday.
Most analysts don't expect a change in the bank's policy
stance but are looking to the message on its inflation forecasts
and whether it seems concerned by the euro's strength.
The meeting comes after the euro marked a two-year high just
above $1.20 at the beginning of the month, until comments about
its level from ECB chief economist Philip Lane knocked it lower.
"The ECB could raise more concerns over a further
appreciation in the euro and make some downward revisions to its
inflation projections," said Commonwealth Bank of Australia
currency analyst Kim Mundy, which would flag easier policy.
"In our view, the dollar can lift further over the remainder
of the week because of the possibility the ECB takes a sharper
dovish turn."
Elsewhere, the dollar traded firmly against the Japanese yen
amid talk of a snap election - something that Yoshihide Suga,
frontrunner to succeed Shinzo Abe in next week's leadership
ballot - signalled in a newspaper interview. The yen JPY=EBS last changed hands at 106.30 per dollar.
The British pound GBP= , meanwhile, was the overnight
laggard - shedding 0.8% on the dollar - amid a fresh crisis in
EU-UK trade negotiations. GBP/
A Financial Times report suggesting Britain might legislate
to override its Brexit withdrawal agreement prompted the EU to
warn there would be no deal if that happened, raising the
prospect - again - of a hard Brexit. New talks are due to begin in London later on Tuesday.
The pound dipped marginally to $1.3162 in Asia and sat a
fraction above a two-week low against the euro at 89.77 pence
EURGBP= .
"The key question for markets is whether the remarks are
still mostly brinkmanship as negotiations near the finish line,"
said NAB economics director Tapas Strickland. "The mild market
reaction suggests markets think so and still sniff a deal."
Much of the data releases due in the Asian trading day are
domestically focused, with Australian payrolls and business
confidence figures due at 0130 GMT.
Final European GDP figures are due later in the day.
Japan's economy shrank an annualised 28.1% in April-June,
worse than the initial estimate of a 27.8% contraction, revised
data from the Cabinet Office showed on Tuesday.