LONDON (Reuters) - The dollar edged lower on Friday and was headed for a third straight week of losses as expectations of a breakthrough in trade tensions between Washington and Beijing fuelled a revival in risk appetite.
The losses came after the Federal Reserve cut interest rats by a quarter-point rate, compounded by a spike in overnight U.S. repo rates this week, which cut into demand for dollars.
Other major central banks, including the Bank of England, the Bank of Japan and the Swiss National Bank, left rates unchanged this week, disappointing some dollar bulls.
"Other central banks are not in easing mode as the Fed has been this week and hopes of a breakthrough in trade talks between the United States and China is also dampening some of the safe-haven appeal of the dollar," said Thu Lan Nguyen, a foreign exchange analyst at Commerzbank (DE:CBKG).
The dollar slipped 0.1% against an index of other currencies (DXY) to 98.18, on track for its third consecutive weekly drop.
Markets focussed on U.S.-China trade talks in Washington before high-level discussions next month. Some signs of progress were emerging.
"What we're looking at is brewing central-bank divergence," said Chris Weston, head of research at brokerage Pepperstone Group in Melbourne. "We're starting to see signs of that resonating in currency markets."
Sterling was the biggest gainer. European Commission President Jean-Claude Juncker said he thought Brussels could reach agreement with Britain on its departure from the European Union.
Sterling rose 0.5% to a two-month high against the dollar and to 87.87 pence against the euro (EURGBP=D3), a four-month high .
The Australian dollar rose to around $0.6799 but remained near the three-week low it reached on Thursday. The New Zealand dollar fell to $0.6285, its weakest since Sept. 3.