* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Risk-on sentiment weakens yen
* Euro regains composure after wild ride post-ECB
* Traders eye Fed, BOJ policy moves
(Updates levels throughout, adds offshore yuan)
By Stanley White
TOKYO, Sept 13 (Reuters) - The yen was pinned near a
six-week low versus the dollar on Friday as signs the United
States and China were narrowing their differences over trade
ahead of key talks decreased demand for safe haven assets.
That nudged the yuan up to near four-week highs against the
U.S. currency in offshore trade, while the euro held steady
after swinging wildly on Thursday following the European Central
Bank's surprise decision to resume government debt purchases
from November to support a flagging economy.
In the very short-term, guarded optimism about a resolution
to the U.S.-China trade war should continue to push Treasury
yields higher and weigh on safe-haven currencies.
However, this confidence could be short-lived as the U.S.
Federal Reserve is widely expected to cut interest rates next
week while the ECB's easing places pressure on the Bank of Japan
to follow suit.
"We've managed to scale back our pessimism about U.S.-China
trade talks, which is a supportive factor for now," said Takuya
Kanda, general manager of research at Gaitame.com Research
Institute in Tokyo.
"Once we start to focus on the Fed's rate cut, perceptions
of the market will change. Treasury yields and dollar/yen look
to be too high and are likely to start drifting lower."
The dollar rose to 108.265 yen JPY=EBS , the highest since
Aug. 1.
The greenback was up 1.2% versus the yen this week, on
course for its best weekly performance since November 2018.
The dollar has also drawn support from a spike in U.S.
Treasury yields, with the benchmark 10-year yield at a five-week
high. U.S. President Donald Trump said on Thursday he would not
rule out an interim trade pact with China. The two sides are preparing for new rounds of talks aimed at
curbing their trade war, which has dragged on for more than a
year, roiling financial markets and threatening to push other
economies into recession.
The yen, widely considered a safe-haven currency, tends to
rise during times of heightened economic or market stress and
vice versa.
China's financial markets were closed for a public holiday
on Friday. In offshore trade, the yuan rose 0.3% versus the
dollar to 7.0459, the strongest since Aug. 19.
Sterling GBP=D3 was up 0.3% on the dollar this week, on
course for its second week of gains after the British Parliament
moved to block a so-called no-deal exit from the European Union.
The pound remains vulnerable, however, given the continuing
uncertainty over how lawmakers will decide the terms of the UK's
divorce from the EU.
The euro EUR=EBS held steady at $1.1068, on course for its
second weekly gain against the dollar.
The single currency initially tumbled on Thursday after the
ECB cut its deposit rate by 10 basis points to a record low of
minus 0.5% and said it would restart bond purchases at a rate of
20 billion euros a month from Nov. 1. The rate cut was widely expected, but the revived bond
purchases were a surprise. Still, the euro managed to claw back
losses as the ECB's comprehensive stimulus package now shifts
the spotlight to the Fed and BOJ policy meetings next week.
Financial markets have fully priced in a rate cut at the
Fed's Sept. 17-18 policy meeting. Most economists expect
additional monetary policy easing in October and December.
The Fed cut rates in July for the first time since 2008.
Trump has publicly criticised the Fed for not cutting rates
more aggressively, but positive economic data has cast some
doubt on the need for extensive easing.
The BOJ is also brainstorming ways to deepen negative
interest rates at minimal cost to commercial banks, as it
considers adopting it as a main policy response to a slowing
economy, sources familiar with the bank's thinking said.
The BOJ's next policy decision is due Sept. 19.