Dollar buoyed by trade deal hopes, strong U.S. economic data

By Hideyuki Sano

TOKYO (Reuters) - The dollar held the upper hand against its rivals on Wednesday, particularly versus traditional safe-haven currencies, on rising hopes for a U.S.-China trade deal and a string of solid U.S. economic data.

The dollar index against major currencies (DXY) was little changed at 97.936 in early Asian trade after rising 0.37% the previous day.

Against the yen, the dollar traded at 109.08 yen , down slightly on the day but still not far from its October high of 109.285.

The Swiss franc changed hands at 0.9925 to the dollar following its 0.5% fall the previous day, while gold tumbled 1.73% on Tuesday and last stood at $1,485.8 per ounce, near the lower end of its trading range over the past month.

The euro stood at $1.1073 (EUR=), having dropped 0.49% on Tuesday and was not far from a near three-week low of $1.10635 hit in U.S. trade on Tuesday. Hopes that the Trump administration could roll back some of the tariffs it imposed on goods from China as part of a "phase one" U.S.-China trade deal boosted risk sentiment in financial markets.

A survey on the vast U.S. service sector published on Tuesday showed that business sentiment had improved in October from a three-year low in September.

The ISM non-manufacturing sector index rose to 54.7 from 52.6 in September, beating market expectations.

The rebound is a welcome sign for dollar bulls as a fall in the index would have suggested that malaise in trade war-hit manufacturers was infecting the service sector, too.

The data came after strong a U.S. employment report on Friday.

"On top of Sino-U.S. trade issues, the market is reacting to signs of U.S. economic strength at the moment," said Kyosuke Suzuki, director of foreign exchange at Societe Generale (PA:SOGN).

The positive mood spilled over to the risk-sensitive Australian dollar, which changed hands at $0.6894 . It was little changed on the day but has maintained gains of 3.4% since hitting a 10-1/2-year low on Oct. 2.

The yuan continued to rally on rising optimism for a trade truce between Washington and Beijing.

The offshore yuan ticked up 0.1% to 6.9948 per dollar after having risen to a three-month high of 6.9867 to the dollar on Tuesday.

The currency has gained 2.9% from its record low in the offshore trade marked in early September.