FOREX-Dollar slides after dovish Fed minutes, U.S.-China trade optimism

* Beijing and Washington agree to extend trade talks

* Euro, sterling rise as trade hopes boost risk appetite

* Oil up; lifts Australian, New Zealand, Canadian dollars

* Fed minutes show policymakers urge patience on rate hikes

* Graphic: World FX rates in 2018

(Adds Fed minutes, new comment, updates prices) NEW YORK, Jan 9 (Reuters) – The dollar tumbled on Wednesday to its lowest level since October after the Federal Reserve expressed caution about future rate hikes, and as investors reduced safe-haven bets due to optimism about U.S.-China trade talks. After initially slipping following poor German and French economic data earlier, the euro recovered to post its highest in about three months. The Swiss franc gained as well, climbing to its strongest rate against the dollar since late September. These currencies gained at the expense of the dollar after several Fed policymakers said last month they could be patient about future interest rate increases. A few of the officials also did not support the central bank’s rate increase that month, according to the Dec. 18-19 policy meeting minutes.

“It will probably be mid-year before the Fed excites hike prospects again,” said Joseph Trevisani, senior analyst, at in New York. News that China and the United States had extended trade talks in Beijing for an unscheduled third day boosted oil prices and broader sentiment earlier in the trading day. Expectations of more easing in China helped the mood as well, with Asian and European shares rallying. “As long as you don’t see a situation where there is a negative turn much like what we saw over the last quarter, markets will probably view any trade development, even if they’re not concluded by the March 1 deadline, with modest optimism just because it reduces the downside risk to the outlook,” said Mazen Issa, senior FX strategist, at TD Securities in New York. In afternoon trading, the dollar index fell 0.8 percent to 95.207, after earlier sliding to a three-month trough. The euro rose 0.8 percent to $1.1537, while sterling gained 0.6 percent versus the dollar to $1.2795. Europe’s single currency briefly gave up gains after disappointing trade data out of Germany and a fall in consumer confidence in France. A day earlier, regional data showed German industrial output fell for the third straight month, feeding investor concern about a slowdown. Against the yen, the dollar was down 0.6 percent at 108.15

Commodity-linked currencies also jumped, buoyed by the recovery in oil and trade talk hopes. The Australian dollar, a barometer of sentiment toward China, was up 0.6 percent at US$0.7178. The Aussie has bounced off near-decade lows below $0.68 reached earlier this month. The rally in riskier assets has accelerated since last Friday when Fed Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions. That eased concern the Fed would be raising rates as the U.S. economy weakened.


Currency bid prices at 2:47PM (1947 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change


Euro/Dollar EUR= $1.1533 $1.1440 +0.81% +0.56% +1.1552 +1.1436 Dollar/Yen JPY= 108.3300 108.7300 -0.37% -1.75% +108.9900 +108.0400 Euro/Yen EURJPY= 124.97 124.40 +0.46% -0.99% +125.0700 +124.3700 Dollar/Swiss CHF= 0.9754 0.9811 -0.58% -0.61% +0.9820 +0.9734 Sterling/Dollar GBP= 1.2788 1.2717 +0.56% +0.24% +1.2803 +1.2712 Dollar/Canadian CAD= 1.3216 1.3272 -0.42% -3.09% +1.3279 +1.3180 Australian/Doll AUD= 0.7180 0.7139 +0.57% +1.86% +0.7193 +0.7135


Euro/Swiss EURCHF= 1.1254 1.1225 +0.26% +0.00% +1.1264 +1.1211 Euro/Sterling EURGBP= 0.9020 0.8997 +0.26% +0.40% +0.9041 +0.8975 NZ NZD= 0.6797 0.6721 +1.13% +1.19% +0.6808 +0.6723


Dollar/Norway NOK= 8.4645 8.5471 -0.97% -2.02% +8.5526 +8.4529 Euro/Norway EURNOK= 9.7658 9.7821 -0.17% -1.42% +9.7875 +9.7544 Dollar/Sweden SEK= 8.8756 8.9277 +0.25% -0.98% +8.9460 +8.8586 Euro/Sweden EURSEK= 10.2391 10.2136 +0.25% -0.24% +10.2445 +10.1946

(Additional reporting by Tommy Wilkes in London; Editing by David Gregorio and Susan Thomas)


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