* Pound holds gains as no-deal Brexit fears ebb
* Dollar, yen sold as risk-on mood returns
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Westbrook
SINGAPORE, Sept 5 (Reuters) - The British pound hovered
around a one-week high on Thursday as another parliamentary
defeat for Prime Minister Boris Johnson made investors
optimistic that a no-deal Brexit could be avoided, while a
broader risk-on mood held back the dollar.
The dollar fell against most major currencies, though gained
on the safe-haven yen, as the UK parliamentary vote, positive
economic data in the United States and China and hopes for a
de-escalation in Hong Kong's political crisis lured investors to
riskier assets.
The pound GBP=D3 was at $1.2242, after its best day
against the dollar in more than five months, and the euro
EUR=EBS also climbed 0.6% to $1.1033. Against a basket of
currencies .DXY the dollar hit a one-week low of 98.390.
The British parliament voted on Wednesday to prevent Johnson
from taking Britain out of the European Union without a deal on
Oct. 31, but rejected his first bid to call a snap election two
weeks before the scheduled exit. "While there is no 'all clear' on market concerns, investor
sentiment pulled back from extremes," said Michael McCarthy,
chief market strategist at brokerage CMC Markets in Sydney.
"Currency markets illustrated the shift...the U.S. dollar
played a passive role as markets wait for the next trade tweets
to drop."
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.
The more upbeat mood cautiously held in morning trade in
Asia, though few expected it to last long.
Brexit is still up in the air, with possible outcomes
ranging from a no-deal exit from the EU to abandoning the whole
endeavour.
"It's important to keep in mind that the situation
continues to look pretty bad," J.P. Morgan analysts reminded
investors in a market note, pointing out that Johnson is pushing
for a snap election and a so-called "hard Brexit" remains an
option.
The weak global trade outlook is also still a key worry,
with U.S. President Donald Trump warning on Tuesday he would be
"tougher" on Beijing in a second term if talks dragged on.
And it was not clear whether Hong Kong would return to calm
after leader Carrie Lam withdraw an extradition bill that
triggered months of often violent protests. That caution kept the yen's JPY=EBS losses reasonably
muted, though it did drift a little further lower to 106.42
per-dollar, its cheapest since Friday.
The yuan CNH= held on to Wednesday's gains at around
7.1487 per dollar in offshore trade.
China will implement both broad and targeted cuts in the
reserve requirement ratio (RRR) for banks "in a timely manner,"
China's cabinet said in a meeting on Wednesday, an indication
that a cut in the key ratio aimed at boosting lending could be
imminent. "A drop in geopolitical risk premium comes as a welcome
relief," said Stephen Innes, Asia Pacific market strategist at
AxiTrader.
"But with the omnipresent trade war clouds looming ominously
over the market threatening to come thundering down at any time,
the air remains thick with caution."