* Trade worries support yen
* Weak U.S. producer prices support another Fed interest
rate cut
* Pound slips on reports of Brexit talks close to breakdown
(New throughout, updates rates and adds graphics and comments
post-U.S. market open; new byline, changes dateline, previous
LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Oct 8 (Reuters) - The dollar slipped against the
safe-haven Japanese yen on Tuesday amid renewed trade-related
worries and as an unexpected drop in U.S. producer inflation
supported the case for the Federal Reserve room to cut interest
rates again later this month.
The Trump administration is moving ahead with discussions
around possible restrictions on capital flows into China, with a
focus on investments made by U.S. government pension funds,
Bloomberg reported on Tuesday, citing people familiar with the
matter.
The discussions comes at a delicate time for U.S.-China
trade relations as top-level trade talks are scheduled to resume
on Thursday and Friday, when Chinese Vice Premier Liu He meets
with U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Steven Mnuchin in Washington. "This obviously is not a good precursor before any type of
negotiations. There is some trepidation in terms of market
expectations (for a deal)," said Minh Trang, senior currency
trader at Silicon Valley Bank in Santa Clara, California.
Against the yen, which tends to benefit during geopolitical
or financial stress as Japan is the world's biggest creditor
nation, the dollar fell 0.32% to 106.94 yen.
Investors, who have boosted the dollar in recent months
thanks to its relatively high interest rate and a strong U.S.
economy, were reluctant to push it significantly higher on
Tuesday.
The dollar index .DXY , which measures the greenback
against a basket of other currencies, was up 0.07% at 99.036.
U.S. producer prices unexpectedly fell in September, leading
to the smallest annual increase in nearly three years, which
could give the Federal Reserve room to cut interest rates again
later this month. "That's typically bearish for the dollar," said Trang.
Investors are waiting for the release of the U.S. Federal
Open Market Committee's minutes from its September meeting, due
on Wednesday, for clues to whether the Fed will cut rates at its
October meeting, in what would be its third interest rate cut
for the year.
Meanwhile, sterling touched a one-month low against the euro
on as investors took fright at reports that Brexit talks between
Britain and the European Union were close to breaking down.
With 23 days before the United Kingdom is due to leave the
bloc, there is no sign the impasse between London and Brussels
could be bridged and both sides are jostling to avoid blame for
a delay or a disorderly no-deal Brexit. The pound was 0.69% lower against the greenback.
US dollar and CFTC https://tmsnrt.rs/2nvttrw
Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>