* Dollar softens, yuan hits three-week high on trade hopes
* Brexit breakthrough chance drives sterling up 2% Thursday
* Trump meets Chinese chief negotiator at 1845 GMT
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Hideyuki Sano and Tom Westbrook
TOKYO/SINGAPORE, Oct 11 (Reuters) - Hopes of progress in
U.S.-China trade talks held down the dollar and lifted riskier
currencies on Friday, while optimistic comments from Europe on
Brexit boosted the British pound.
The greenback was a little weaker against the yuan and the
Australian and New Zealand dollars as well as the euro, though
movements were slight as caution tempered enthusiasm for risk.
"All it takes is one tweet, one headline to change the
landscape," analysts at OCBC Bank in Singapore said in an email.
"The current situation points to a heavy USD posture, but
given the shifty sentiments, we urge caution in excessively
chasing the risk-on trades higher."
Top U.S. and Chinese negotiators wrapped up a first day of
trade talks on Thursday, with U.S. President Donald Trump
describing the meetings as "very, very good negotiation with
China".
Business groups, too, expressed optimism the two sides might
be able to ease a trade war that has sapped economic growth
around the globe. And a scheduled meeting between Trump and China's Vice
Premier Liu He, the chief Chinese negotiator, at 1845 GMT is
seen as a further positive, after the U.S. blacklisting of some
Chinese technology firms made for a bumpy lead-in to the talks.
Improved risk appetite pushed the safe-haven yen JPY=
lower to 108.00 per dollar, its weakest since Oct. 1, and lifted
the Chinese yuan CNY= to 7.0983 per dollar, its strongest
since Sept. 23.
"Investors are ready to celebrate any form of a U.S.-China
trade deal, even a limited one," said FXTM analyst Han Tan.
Against a basket of currencies the greenback was a little
softer at 98.655 .DXY . The Australian dollar AUD= rose 0.3%
to a two-week high of $0.6782 and the kiwi NZD= edged higher
to $0.6320.
Also undermining the dollar, data showed on Thursday U.S.
consumer prices were unchanged in September and underlying
inflation retreated, supporting expectations the Federal Reserve
will cut interest rates in October.
The euro EUR= rose 0.1% to $1.1013.
Sterling was little changed, but at $1.2437 sat just under a
two-week high it hit after soaring 2% overnight, its largest
daily percentage gain in seven months, driven by hopes for a
Brexit resolution.
Irish Prime Minister Leo Varadkar said on Thursday a Brexit
deal could be clinched by the end of October to allow the United
Kingdom to leave the European Union, after what he called a very
positive meeting with Boris Johnson. Ireland is a major factor in the prolonged Brexit impasse,
though details of the pair's discussion or parameters of a
possible breakthrough were scarce.
"There is a lot to play for still and the script can change
at any moment in Brexit, so it's tough staying long GBP for any
period of time," said Chris Weston, head of research at
brokerage Pepperstone in Melbourne.
"It does feel that ahead of the (British parliament meeting
on) 19th October that traders will be buyers of weakness, but
it's risky and, given the implied volatility, I would be keeping
my position size to a minimum."
Editing by Jacqueline Wong)