February 5, 2019 / 3:55 PM / 6 months ago

FOREX-Dollar firm ahead of Trump's State of the Union address

* Appetite for risk pulls Swiss franc to 2-month lows

* Aussie rises after RBA sounds less dovish than expected

* Sterling's losses deepen as Brexit outlook turns cautious (Updates rates, comments to U.S. market open; changes dateline, previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Feb 5 (Reuters) - The U.S. dollar edged higher against a basket of major currencies on Tuesday as investors awaited President Donald Trump's State of the Union address for a possible update on the U.S.-China trade war.

Continued recovery in investors' appetite for risk taking exerted pressure on safe-haven currencies, dragging the Swiss franc lower, while the Australian dollar rose after the nation's central bank warned of risks to growth and steered clear of an explicit policy-easing signal.

With central banks around the world in a holding pattern, and a host of uncertainties on trade and other factors, trading in currency markets was largely range-bound, Eric Viloria, FX strategist at Credit Agricole, said.

"These ranges could go on for some time until there is more decisive central bank actions or resolutions to some of these political dynamics whether it's trade negotiations or otherwise," said Eric Viloria, FX strategist at Credit Agricole.

The dollar index, which tracks the greenback versus the euro, yen, British pound and three other currencies, was up 0.19 percent at 96.034. The index, which hit a more than one week high of 96.095 earlier in the session, is little changed for the year.

The euro was 0.2 lower against the dollar after a survey showed on Tuesday that euro zone businesses expanded at their weakest rate since mid-2013 at the start of the year.

Investors are shifting their attention to President Donald Trump's impending State of the Union address at 2100 ET (0200 GMT), which could hint at progress in U.S.-China trade talks.

Meanwhile, continued recovery in investors' appetite for risk taking exerted pressure on safe-haven currencies, and the Swiss franc, which tends to appreciate during bouts of economic uncertainty, sank to an 11-week low against the dollar.

The Australian dollar rose sharply, reversing earlier losses, after the Reserve Bank of Australia (RBA) held rates at record lows at its first meeting of the year but sounded less dovish than expected.

"The RBA came out relatively neutral and although they warned of downside risks they did not take a firm dovish tilt ala the Fed and that left markets scrambling to cover," Brad Bechtel, global head of FX at Jefferies, said in a note.

Sterling accelerated its losses against the dollar and the euro on the back of renewed selling pressure after the currency fell below a key market level following weak data.

The Canadian dollar slipped against its U.S. counterpart as oil prices edged lower.

Reporting by Saqib Iqbal Ahmed; Editing by Bernadette Baum

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