* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 5 (Reuters) - The euro held near three-week highs on Thursday as strong German industrial orders and hopes over a softening in U.S. trade rhetoric towards European Union carmakers boosted sentiment.
German industrial orders had a stronger-than-expected jump in May after four consecutive monthly drops, as demand from domestic customers and the rest of the euro zone picked up.
Meanwhile, German carmakers are set to post their biggest daily gain since late March with Daimler, BMW , Volkswagen and Renault leading the broader index higher.
The U.S. ambassador to Germany told German car bosses that President Donald Trump would suspend threats to impose tariffs on cars imported from the EU if the bloc lifted duties on U.S. cars, a German newspaper reported on Wednesday.
"That looks like a breakthrough may be imminent and overall it is a broad euro-risk positive day," fund manager Constantin Bolz of German-based wealth manager Portfolio Concept said.
Reports that the European Central Bank may be preparing to raise interest rates by September or October also helped the euro, though thin volumes were a factor, with U.S. markets shut overnight for Independence Day.
In early London trading, the single currency rallied to a high of $1.1711, just shy of a three-week peak of $1.1722.
By 1018 GMT, the euro was trading around $1.16905, up 0.3 percent on the day but still some distance from more than three year highs above $1.2550 hit in early February.
But with a deadline for Washington to impose tariffs on Chinese imports also due, markets remained rangebound.
The dollar's index against six rivals was 0.34 percent lower at 94.34, its lowest level in a week.
While the dollar has been supported by the perception of the relative strength of U.S. economic growth and the attraction of its higher bond yields, some market players say recent falls in those yields may be undermining the currency.
The Fed will release minutes of its June meeting, with investors looking for clues on whether it is still on track to raise interest rates twice more this year. Monthly payrolls data follow on Friday.
Beyond the outlook on interest rates, markets will be closely analysing the recent strength in European activity data.
Euro zone business growth accelerated in June, offering encouragement to the European Central Bank to tighten policy and pulling up an economic surprise index by Citibank on Europe from near seven-year lows last month.
"The euro is getting a bit of a lift on the German data though the trade concerns will continue to dominate markets with the Fed minutes being the key data point," said Kenneth Broux, a currency strategist at Societe Generale in London.
The offshore yuan was broadly steady at 6.6466 per dollar, some distance from Tuesday's 11-month low of 6.7344, following reassuring remarks from Yi Gang, governor of the People's Bank of China (PBOC).
Reporting by Saikat Chatterjee; Additional reporting by Hideyuki Sano in TOKYO; editing by John Stonestreet and Alexander Smith