* Graphic: World FX rates in 2018
* Euro, sterling gain marginally versus the dollar
* Yen strengthens in Asian trade
* Aussie dollar falls 0.15 pc vs greenback
By Vatsal Srivastava
SINGAPORE, Jan 10 (Reuters) - The dollar weakened versus major
peers such as the euro and yen on Thursday due to growing expectations
the Federal Reserve will pause its rate tightening cycle this year.
Minutes from the Fed's Dec. 18-19 meeting revealed that several
policymakers were in favour of the US central bank keeping rates
steady this year.
Broader market sentiment turned slightly cautious in Asian trade
as markets waited for concrete evidence that progress is being made in
U.S.-China trade talks.
MSCI's broadest index of Asia-Pacific shares outside Japan
was lower by 0.6 percent, while riskier currencies such as the
Australian dollar fell by 0.15 percent to $0.7155. U.S. equity
futures also turned lower, falling 0.5 percent.
The yen gained 0.2 percent to 107.90.
"The China-US trade talks are just a first step towards easing
tensions on both sides," DBS analysts Eugene Leow and Neel
Gopalakrishnan said in a note.
"While there was agreement on less thorny issues such as
agriculture and energy, US demands for verification and enforceable
targets on intellectual-property rights, transfer of technologies and
non-tariff barriers may not be that easily addressed," the note said.
They expect room for volatility in the lead up to the March 1
deadline where negotiations on these issues need to be concluded.
But most traders still expect market sentiment to remain positive
in the medium term on expectations the Fed will not raise rates in
2019 as well as a potential trade deal in coming months between the
world's two largest economies.
"The Fed has acknowledged market concerns with its language.
The markets are clearly reading into this as a more accommodative
stance," said Michael McCarthy, chief markets strategist at CMC
Markets in Sydney.
"Optimism on US-China trade talks is also bolstering risk
sentiment... the sharp rally in oil prices is also indicative of the
fact that global growth fears were probably overdone," added
McCarthy.
Commodity currencies such as the Canadian dollar have been the
biggest beneficiaries of improving risk sentiment this week. The
loonie fetched C$1.3230, hovering close to its highest level in more
than a month, thanks to a sharp rebound in oil prices over the last
couple of weeks.
Also supporting the loonie was the Bank of Canada's assessment
that further rate hikes may be necessary.
The dollar index was steady at 95.17, after losing 0.7 percent
on Wednesday. It has weakened in four out of the last five sessions as
traders wager that US interest rates will stay steady in 2019.
The index gained 4.3 percent in 2018 as the Fed hiked rates four
times on the back of a strong domestic economy, falling unemployment
and rising wage pressures.
The euro and sterling each gained marginally on the dollar,
fetching $1.1547 and $1.2790 respectively. However, traders expect the
strength in both these currencies to fade in the coming weeks.
Economic data in the eurozone has remained consistently weaker
than forecasts over the last few months, especially in France and
Germany, the eurozone's economic powerhouses. The European Central
Bank is widely expected to remain accommodative in 2019, which should
keep a lid on the single currency.
Brexit woes are most likely to dominate sentiment towards
sterling. British Prime Minister Theresa May must win a vote in
parliament to get her Brexit deal approved or risk seeing Britain's
exit from the European Union descend into chaos. The vote is now due
to take place on Jan. 15.
May's chances of winning the vote look slim as the DUP, the small
Northern Irish party that usually props up her government, is opposed
to the deal.
(Reporting by Vatsal Srivastava; Editing by Shri Navaratnam and
Richard Borsuk)
((vatsal.srivastava@thomsonreuters.com; +65 68703571; Reuters
Messaging: vatsal.srivastava.thomsonreuters.com@reuters.net))