* Trade war optimism fires up risk-taking
* Euro back above $1.13, still near three-month lows
* Quiet start to the week with U.S. markets closed
* Graphic: World FX rates in 2019
(Adds details, updates with latest prices)
By Tommy Wilkes
LONDON, Feb 18 (Reuters) - The euro rose past $1.13 and riskier
currencies like the Australian dollar strengthened on Monday as
optimism over a breakthrough in U.S.-China trade war talks encouraged investors.
The euro has been stuck in a trading range since November as
growing weakness in the euro zone economy offsets dwindling
expectations the Federal Reserve will raise U.S. interest rates again
But after dropping to a three-month low on Friday, the euro has
recovered, helped by renewed demand for riskier assets as hopes rose
for an end to the U.S.-China trade conflict after both sides reported
progress in talks.
"Generally the mood is still quite positive on the outlook
for trade," said Adam Cole, a currencies analyst at RBC Capital
Markets, adding that he thought the risk-on mood would continue.
"If anything we would be running with it. You have a
background of quite decent growth and a Fed that is putting rates on hold."
However, he said a better way to play the Fed's pausing of rate
increases was in dollar/yen, as more Japanese investors choose not to
hedge their purchases of dollar-denominated assets because they can
already earn a decent yield after last year's U.S. rate increase.
Cole sees dollar/yen rising to 120 yen per dollar by the end of
2019 from current levels of 110.55.
The euro ticked 0.2 percent higher to $1.1317 , while the dollar
index - which measures the dollar against a basket of rivals - slipped
0.2 percent to 96.755 in a quiet session with U.S. markets closed for
a holiday on Monday.
Despite Monday's gains, traders are betting on a weaker euro in
the coming months. They expect the European Central Bank to maintain
its accommodative monetary policy amid slow growth, tepid inflation
and political uncertainties in the euro zone.
Commerzbank analysts said the euro remained vulnerable to any
flare-up in a U.S.-European trade dispute, too.
"There would be very little to report on the euro positive
side if this conflict were to escalate. The smallest economic
disruptions would no doubt be damaging for the euro in the light of
the fragile state of the euro zone economy," they wrote.
The Australian dollar, considered a barometer of risk sentiment,
rose 0.2 percent to $0.7150 .
Sterling gained 0.2 percent to $1.2918 , up from last week's
one-month lows, as traders awaited the next Brexit developments.
(Editing by Larry King)