By Hideyuki Sano
TOKYO (Reuters) - The dollar hovered near a seven-week low against a basket of major currencies, in part as safe-haven demand for the U.S. currency ebbed on relief that tariffs the United States and China imposed on each other's goods were set at lower levels than some had feared.
The British pound stepped back from two-month highs on caution over whether the European Union and UK can reach a Brexit deal at their ongoing summit while the New Zealand dollar jumped to three-week highs on Thursday after strong domestic GDP data.
The dollar index stood at 94.554 (DXY) (=USD), near its seven-week low of 94.308 touched on Tuesday as its more risk-sensitive rivals held firmer.
The euro traded at $1.1671 (EUR=), not far from its peak in August and September around $1.1730.
The Australian dollar, seen as a proxy for China-related trades as well as a barometer of broader risk sentiment, also held at three-week highs, having gained 1.5 percent so far this week.
The Aussie was also helped by comments from Chinese Premier Li Keqiang on Wednesday that Beijing will not stoop to competitive devaluation of its currency.
His comments came after China imposed new retaliatory levies on about $60 billion worth of U.S. goods at scaled-back rates. Washington's new duties were set at 10 percent for now, before it is set to rise to 25 percent by the end of 2018, rather than an outright 25 percent.
"That the U.S. chose a lower rate seems to suggest it is making some allowances for China. Chinese Premier Li's comments on the yuan could be also seen as a overture to Washington," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
"All in all, markets are hoping that the two sides will continue to talk and another round of tariffs could be avoided."
BREXIT TALK
The British pound had hit two-month highs on Wednesday after UK inflation data overshot market expectations but it retreated after the Times reported that Prime Minister Theresa May had rejected an improved offer from the EU to solve the Irish border issue.
After a European Union leaders' dinner on the first evening of the two-day meeting, leaders of Lithuania and Slovakia said there has been no progress on Brexit and the Irish border.
The British pound last fetched $1.3137
The New Zealand dollar jumped after data showed its economy grew at the fastest pace in two years in the second quarter.
The kiwi rose as much as 0.6 percent to a three-week high of $0.6652 and last stood at $0.6642
The Canadian dollar was firm ahead of further talks to revamp the North American Free Trade Agreement.
It last stood at C$1.2924 to the U.S. dollar
The yen changed hands at 112.28 to the dollar
The yen has pulled back slightly this week as investors reassessed the impact of the Sino-U.S. trade war.