November 21, 2019 / 8:27 PM / 9 months ago

FOREX-Dollar firms as U.S.-China trade remains in focus

* Dollar index edges higher

* Pound weakens on the day after Labour election manifesto (Updates to U.S. afternoon)

By Saqib Iqbal Ahmed

NEW YORK, Nov 21 (Reuters) - The dollar shook off early weakness to creep higher against other major currencies on Thursday, with investors focused on the latest developments in a bitter 16-month long trade dispute between the United States and China that has weighed on the world economy.

Risk sentiment seesawed on Thursday amid mixed signals on whether Washington and Beijing can work out at least a partial deal to end trade-related tensions between the world's two largest economies.

Investors, who in recent weeks had grown optimistic about the possibility of a deal, were unnerved by a hardening of the trade war rhetoric from both sides in recent days.

The United States would raise tariffs on Chinese imports if no deal is reached with Beijing to end a trade war, U.S. President Donald Trump said on Tuesday.

On Thursday a report in the South China Morning Post said the United States could delay tariffs on Chinese imports even if a deal has not been reached by Dec. 15, when tariffs kick in on goods including electronics and Christmas decorations.

Separately, Chinese Vice Premier Liu He, also the chief trade negotiator, said he was "cautiously optimistic" on a phase one deal, according to a report by Bloomberg.

"The comments that are offsetting each other are not really good for the market," said Alfonso Esparza, senior currency analyst at OANDA in Toronto.

"Right now the dollar is very trade headline dependent," he said.

The dollar index, which compares the dollar against six major currencies, was up 0.07% at 97.999.

Increased trade tensions between Washington and Beijing have generally been supportive of the dollar as investors view the United States to be in better shape than other economies to weather a trade war.

On Wednesday, the U.S. House of Representatives passed two bills to back protesters in Hong Kong and send a warning to China about human rights, with President Donald Trump expected to sign them into law.

"The bills approved by the U.S. Congress regarding Hong Kong further antagonize the relationship, revealing the confrontation between the U.S. and China transcends the Trump Administration," said Marc Chandler, chief market strategist at Bannockburn Global Forex.

The pound struggled to break through the $1.30-mark yet again on Thursday, as the rebound in the dollar and an election manifesto from the opposition Labour Party that fuelled some profit-taking on the British currency.

The pound was 0.15% lower at $1.2902.

Reporting by Saqib Iqbal Ahmed; Editing by David Clarke and Chizu Nomiyama

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