* Japanese yen near 5-month low vs. dollar
* Chinese offshore yuan set for sixth winning week vs.
dollar
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, Nov 8 (Reuters) - The euro edged down to hit a new
three-week low against the dollar on Friday as the U.S. currency
shone on news that China and the United States had agreed to
cancel some tariffs as part of a potential preliminary pact to
end their trade war.
The two countries have agreed to roll back tariffs on each
others' goods in a "phase one" trade deal if it is completed,
officials from both sides said on Thursday. Sentiment is likely to remain supportive for the dollar,
equities and other risky assets as a de-escalation in the
U.S.-China trade war removes a huge risk to the global economic
outlook.
However, there is still some scepticism about a trade deal
as officials inside and outside the White House have bristled at
the notion of giving up punitive tariffs.
Muddying the waters further, White House spokeswoman
Stephanie Grisham told Fox News Channel on Thursday that the
United States is "very, very optimistic" about reaching a trade
deal with China soon. "When the trade war was looking like it was worsening,
people were buying dollars as a safe haven. Now that the trade
war seems to be winding down, people are buying dollars because
the U.S. economy will benefit," said Marshall Gittler,
strategist at ACLS Global.
"The market's attitude towards the euro is just plain
negative right now," he said, adding that he expects the risk
sentiment to wind down "unless or until the U.S. administration
chimes in with some confirmation" that the tariffs will be
rolled back.
The euro fell 0.2% to $1.1028 EUR=EBS , its lowest since
Oct. 15.
The prospects of an end to the U.S.-China trade war left the
safe-haven yen nursing losses against most major currencies.
Versus the dollar, the yen was near a five-month low
JPY=EBS and against the Australian dollar the Japanese
currency was close to a 15-week low AUDJPY=D3 .
Progress in resolving the 16-month-long trade war also
supported China's yuan. In the offshore market, the yuan
CNH=EBS traded at 6.9834 per dollar, close to a three-month
high it jumped to on Thursday. The yuan was set for its sixth
straight weekly gain.
Analysts from Bank of America Merrill Lynch, however, see
the optimism for the U.S. currency fading eventually.
"For the dollar to weaken back to its long-term equilibrium,
we need better global data and to get better global data, we
need trade deals," they said in a note to clients.
"We remain optimistic and continue expecting the dollar to
gradually weaken next year, as we put trade tensions behind (us)
and the outlook of the global economy improves," they said.
Traders will be watching for the University of Michigan
consumer survey in the United States, due at 1500 GMT.
Economists polled by Reuters expect the survey to inch slightly
higher to 95.9 in November from 95.5 in October.
The pound GBP=D3 traded just below $1.28, close to the
lowest since Oct. 24 and on course for a 1% decline this week.
The Bank of England has so far resisted following the U.S.
Federal Reserve and the European Central Bank in cutting its
main interest rate, but the outcome of Thursday's meeting
suggests the UK central bank is poised to change its stance.