- Sterling hovers near five-week high vs dollar
- Euro falls to fresh one-month low vs pound
- Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
The euro and sterling held onto overnight gains against the dollar on Tuesday after the European Union's chief negotiator raised hopes of a deal for Britain to leave the economic bloc being struck in the coming weeks.
Other major currencies were largely hemmed into tight ranges as investors bided time as they looked to developments on international trade disputes, in particular on any U.S. moves to slap fresh duties on China amid heightened tensions between the two economic giants.
The pound had been under pressure in recent weeks on worries that Britain would exit from the EU without any formal trading agreement.
"If the negotiations for Brexit go well it naturally becomes a tailwind for the pound," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
"If Britain achieves Brexit without problems, the advantages for the European Union are big as well."
Monday's reports that Michel Barnier, the EU's top negotiator, told a forum in Slovenia that it was "realistic" to expect a Brexit deal in six to eight weeks helped send the pound sharply higher to $1.3052 GBP=D3 , its highest level since Aug. 2.
Barnier's comments were seized on by markets as a signal that the UK may avoid a disorderly no-deal Brexit.
Sterling gained about 0.1 percent to $1.3036 on Tuesday, hovering near its five-week high touched overnight.
The euro was almost flat at $1.1594 EUR= . It advanced about 0.4 percent during the previous session, helped in part by an easing in concerns over Italian debt.
Against sterling, the single currency dropped to a fresh one-month low of 88.945 pence EURGBP=D3 .
Policymakers at the Bank of England and European Central Bank are widely expected to leave their policy settings unchanged at their respective meetings on Thursday.
The dollar index .DXY , which tracks the greenback against a basket of six currencies, was steady at 95.156, after edging down 0.2 percent overnight.
Against the yen, the dollar rose nearly 0.2 percent to 111.30 yen JPY= as investors reduced some of their safe-haven holdings of the greenback on hopes of a Brexit deal.
The Australian dollar AUD=D3 was flat at $0.7112, pinned near a more than two-and-a-half year low of $0.7097 reached during the previous session.
