* Euro, sterling gain marginally versus dollar
* Oil up; lifts Australian, Canadian dollars
* Fed minutes show policymakers patience on rate hikes
* Beijing and Washington agree to extend trade talks
* Graphic: World FX rates in 2018
By Tom Finn
LONDON, Jan 10 (Reuters) - The dollar on Thursday languished near
a 3-month low on signs the Federal Reserve may soon pause its interest
rate tightening cycle.
Minutes from the Fed's Dec. 18-19 meeting showed that several
policymakers were in favour of the U.S. central bank keeping rates
steady this year.
That has weakened the dollar at a time when investors are selling
safe-haven currencies due to mounting optimism about U.S.-China trade talks.
"This drop in the dollar is an overdue correction following a
surprisingly robust few weeks despite the massive collapse in U.S.
rate expectations," said Ulrich Leuchtmann, a currency strategist
The dollar's resilience can be partly explained by the fact that
fears are growing about a global recession which has added to the
dollar's safe haven appeal, he said.
China and the United States have extended trade talks in Beijing,
boosting oil prices and broader sentiment.
That has lifted China's offshore yuan to its highest level since
August along with recent assurances from Beijing of further fiscal
boosts to the slowing economy.
The yuan has breached the key 6.8 per dollar level in both onshore
and offshore trade.
Commodity currencies such as the Canadian dollar have been the
biggest beneficiaries of improving risk sentiment this week. It
fetched C$1.3230, hovering close to its highest level in more than a
month, helped by the rebound in oil prices.
The dollar index was steady at 95.22, 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 Fed's recent caution is something that has never been
stated so explicitly and coming on the back of last month’s bumper
payrolls is a signal it likely to be much more dovish than it was last
year," said CMC Markets analyst Michael Hewson.
The euro gained marginally on the dollar, fetching $1.1547.
Economic data in the euro zone has remained consistently weaker
than forecasts over the last few months, especially in France and
Germany, the bloc's economic powerhouses.
The European Central Bank is widely expected to remain
accommodative in 2019, which should keep a lid on the single currency.
(Additinoal reporting by Vatsal Srivastava; Editing by Toby Chopra)
((firstname.lastname@example.org; +44 2075427508 ; Reuters Messaging: email@example.com))