CORRECTED-FOREX-Chinese yuan surges to three-month high on trade optimism, "tiny" rate cut

(Corrects first paragraph to show yuan at 3-month high, not
4-month high)
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Elizabeth Howcroft
Nov 5 (Reuters) - China's offshore yuan surged past 7 per
dollar to three-month highs on Tuesday, benefiting from signs
Beijing and Washington are approaching a trade deal and also
from the Chinese central bank's decision to trim lending rates
by only 5 basis points.
Optimism over trade also boosted other trade-reliant
currencies, such as the Australian and New Zealand dollars,
which rose as much as half a percent.
China is pushing U.S. President Donald Trump to remove more
tariffs imposed in September as part of a "phase one" U.S.-China
trade deal, which is expected to be signed later this month,
people familiar with the negotiations said. The yuan jumped 0.6% to the highest since Aug. 5 at 6.9930
CNH=D3 . The onshore yuan also posted its strongest close since
Aug. 2. CNY=CFXS . The currency held its gains even after China's central bank
cut its one-year medium-term lending facility (MLF) rate for the
first time since early 2016, though it opted for a 5 bps cut
that Commerzbank called "tiny" "It might be fair to say the PBoC only fine-tuned its
monetary policy stance ... Typically, a rate cut will bring
depreciation pressure to the currency," Commerzbank told
clients, adding the trade optimism was the main factor driving
the yuan above the 7 mark.
China and the U.S. have imposed tariffs on each other's
goods in a trade war that has dragged on for 16 months and
raised the spectre of a global recession. Resolving the row
would boost riskier assets, ease concern about the economic
outlook and reduce the need for aggressive monetary easing.
The U.S. dollar was flat against a basket of currencies
.DXY in early London trading but advanced around a quarter
percent against the safe-haven yen .JPY and Swiss franc
CHF=EBS .
Kit Juckes, head of FX strategy at Société Générale, said
the agreement would probably mark a truce rather than peace but
added that "the chance of getting a first-stage deal seems to be
quite good."
The optimism spilled over into other currencies, with the
Australian dollar AUD=D3 not far off three-month highs. It
wasn't much moved after the central bank left monetary policy
unchanged, as expected. The kiwi dollar rose 0.3%
NZD=D3 .
The Norwegian and Swedish crowns also rose versus both
dollar and euro NOK=D3 SEK=D3 .
The euro was flat against the dollar EUR=EBS . It rose
0.26% versus the yen EURJPY=EBS .
Jukes said the euro would be one of the last currencies to
benefit from improved risk sentiment, noting that Monday's data
showing Polish manufacturing activity in its sharpest downturn
in 10 years had taken the wind out of the euro's sails.
Central European states such as Poland are a key market and
investment destination for euro zone companies.