* Trade-exposed currencies jump on U.S.-China trade talks
* Yen sold as risk-on mood returns
* Some moves retraced in afternoon trade as caution emerges
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Westbrook
SINGAPORE, Sept 5 (Reuters) - China's yuan and the
Australian dollar rallied after news on Thursday that China-U.S.
trade talks would resume next month, but investors sold the safe
haven yen, even though any de-escalation in the trade war would
benefit Japanese exporters.
Other factors helping support risk sentiment, were reduced
chances of Britain crashing out of the European Union on Oct. 31
without a deal, and a potential breakthrough in the Hong Kong
political crisis following a move to withdraw an extradition
bill that had sparked mass protests. Sterling held onto gains made overnight, after the British
parliament voted to stop a "no deal" Brexit and to prevent Prime
Minister Boris Johnson from calling a snap election that could
have given him the mandate to keep alive the threat of "no
deal". It still leaves Brexit up in the air, with possible outcomes
still ranging from a no-deal exit to abandoning the whole
endeavour.
The pound sat around $1.2241 and the euro EUR=EBS at
$1.1027, mostly holding on to overnight gains.
For the broader market, the resumption of China-U.S. trade
talks was the main factor at play. Talks will be held in
Washington in early October, China's commerce ministry said.
"This news has injected a fair amount of optimism in
markets," said Prashant Newnaha, senior rates strategist at TD
Securities in Singapore.
"It does seem that the markets were positioning more
bearishly, and now we've gotten this potential good news and the
markets are running with it," he said, adding global economic
indicators had also recently been showing some green shoots.
Sentiment has been skittish, however, and some analysts
sounded a note of caution.
"The U.S. is still going to raise tariffs next month and
December, as far as we know," said Joe Capurso, senior currency
strategist at the Commonwealth Bank of Australia in Sydney.
"That's a negative for the world economy and the Chinese
economy."
Against a basket of currencies, the dollar .DXY lifted a
little from a one-week low to 98.482.
The Australian and New Zealand dollars, AUD=D3 NZD=D3
Chinese yuan CNY= and South Korean won KRW= all jumped
against the dollar, while the yen JPY=EBS fell nearly 0.4% to
106.75 per dollar, its weakest in more than three weeks.
The Australian dollar touched a one-month high of $0.6825,
seen as a technical resistance level while the New Zealand
dollar hit a one-week peak of $0.6377. The trade-exposed won
climbed the most of Asia's currencies, rising about 0.5% to
1198.00 per dollar.
The Canadian dollar CAD= spiked sharply to C$1.3344 per
dollar after the Bank of Canada left interest rates on hold and
sounded less dovish than the market had expected.