* Euro back at weakest since May 2017
* Trump says a deal with China could happen soon
* Dollar near its recent highs, enjoys safe haven demand
* New Zealand dollar rises on central bank comments
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts, adds details, new quote)
By Tommy Wilkes
LONDON, Sept 26 (Reuters) - The dollar rebounded and was
headed towards its highest since 2017 on Thursday, while the
euro dropped to a 28-month low, amid optimism over a trade deal
between the United States and China.
Despite the opening of an impeachment inquiry into U.S.
President Donald Trump this week and mixed signals on a trade
deal, the dollar has remained resilient. It has been in demand
both when investors get nervous, and also when a deal with China
- and a boost to the global economy - seems within reach.
The euro, by contrast, slipped to $1.0922 EUR=EBS ,
touching a 28-month low and eclipsing its lows of earlier this
month, when talk of more European Central Bank monetary policy
easing peaked.
While the Federal Reserve is cutting interest rates, other
currencies do not look more appealing than the dollar, because
of the cloudy outlook for the global economy and stop-start
trade negotiations, said Neil Mellor, a markets analyst at BNY
Mellon.
"You have a parade of ugly currencies. It's not obvious what
else you buy instead," he said.
The dollar index, which measures it against a basket of
other currencies, was last up 0.1% at 99.107 .DXY , its
strongest since it reached 99.37 earlier this month, the highest
since May 2017.
Trump stoked hopes for a trade deal by telling reporters in
New York that the United States and China were having "good
conversations" and that an agreement "could happen sooner than
you think". Not everyone thinks the dollar will reign supreme, however.
"USD rallied on the back of growth weakening in the rest of
the world economies, which export capital mostly into the U.S. A
trade deal may allow global trade to rebound temporarily,
helping growth in manufacturing economies, easing their capital
exports and thus weakening the USD," Morgan Stanley strategists
said in a note.
KIWI RALLIES
The biggest mover among the major currencies was the New
Zealand dollar, which gained after its central bank governor
said it was unlikely he would need to use unconventional
monetary policy. The kiwi was last up 0.6% at
$0.6299 NZD=D3 .
The trade-sensitive Australian dollar AUD=D3 rose 0.2% to
$0.6760.
China's yuan was up at 7.1270 per dollar in the offshore
market CNH=EBS .
The Japanese yen, perceived as a safe haven, rose 0.2% to
107.59 yen per dollar JPY=EBS .
Sterling dropped 0.1% to $1.2336 GBP=D3 after plunging
more than 1% on Wednesday as conflict over Brexit gripped the
British parliament.
Euro vs U.S. dollar https://tmsnrt.rs/2noVujW
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(Editing by Larry King)