* Pound drops as polls show tighter UK election race
* Rebound in Chinese manufacturing lifts Aussie, Kiwi
* Dollar advances slightly vs yen
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Westbrook
SINGAPORE, Dec 2 (Reuters) - The British pound began the
week on the back foot as polls showed a tightening U.K. election
race, while an unexpected rebound in Chinese manufacturing
supported risk appetite.
Sterling GBP= was a quarter of a percentage point lower at
$1.2910 as a clutch of polls showed Prime Minister Boris
Johnson's Conservative Party losing some of its lead ahead of
the Dec. 12 election, adding uncertainty. "A decent Tory (Conservative) majority is in the price,"
said Chris Weston, head of research at brokerage Pepperstone.
"GBP remains a buy on dips here."
More broadly, investors clung to hopes for a U.S.-China
trade truce and cheered official data released over the weekend
showing Chinese factory activity surprisingly grew for the first
time in seven months in November. The trade sensitive Australian AUD= and New Zealand
dollars NZD= each rose more than 0.1%, with the Aussie buying
$0.6768 and the kiwi $0.6439. The Chinese yuan CNH= was a tiny
bit firmer at 7.0271 per dollar.
The greenback rose 0.1% against the Japanese yen JPY= to
109.66 yen and was steady against the euro EUR= at $1.1017.
The Aussie and the kiwi briefly unwound some gains after
news website Axios reported that tensions in Hong Kong had
become an obstacle to a Sino-U.S. trade deal, with talks likely
to last at least another month. "The market is taking it with a degree of salt, waiting for
clarity," said Rodrigo Catril, senior FX strategist at National
Australia Bank in Sydney.
"We keep on getting these unofficial statements," he said.
"No-one is going to be taking major positions until we get more
clarity on the trade front."
China's Caixin manufacturing PMI, with a greater focus on
smaller businesses, due at 0145 GMT may offer a more detailed
economic picture, ahead of European and U.S. figures due later
in the day.
However, official clarity on the future of the Sino-U.S.
trade talks remains a key focus.
Axios' report added to worries that U.S. President Donald
Trump's approval of a law backing anti-government protesters in
Hong Kong could derail negotiations, as yet more demonstrations
flared up in the finance hub over the weekend. China warned the United States last week it would take "firm
countermeasures" in response and said attempts to interfere in
the Chinese-ruled city were doomed to fail.
China's Global Times newspaper also reported on Sunday that
Beijing's top priority is the removal of existing tariffs on
Chinese goods.