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EFX

FOREX-Yuan tops seven-month high, Aussie gains tariff hike delayed

* China-U.S trade talks make "substantial progress"

* Aussie, Kiwi also gain

* Analysts caution that trade optimism priced in

By Tommy Wilkes

LONDON, Feb 25 (Reuters) - China's yuan touched aseven-month high and the commodity-linked Australian and NewZealand dollars gained on Monday after U.S. President DonaldTrump confirmed he would delay a planned increase in tariffs onChinese imports.

Trump said on Sunday that he would push back a March 1deadline after trade talks between Washington and Beijing made"substantial progress".

Chinese equities surged as investors and European sharesalso opened higher.

The offshore yuan rose as high as 6.6737 per dollar and wasup 0.3 percent at 6.68 CNH=EBS by 1020 GMT.

"There was a huge risk premium in the renminbi that is beingpriced out," said Esther Reichelt, Frankfurt-based FX strategistat Commerzbank. News of the postponement was "not that much of asurprise" as the market had already been factoring in reducedChina-U.S. trade tensions.

The Australian dollar, seen as a proxy for China riskbecause of Australia's dependence on Chinese demand for itsexports, rose half a percent to $0.7168AUD=D3 . The NewZealand dollar gained 0.7 percent to $0.6889NZD=D3 .

The euro EUR=EBS gained against a weaker dollar, adding0.2 percent to $1.1354 to keeping it within recent tradingranges.

The dollar index, which measures it against a basket ofother currencies, fell 0.1 percent to 96.390 .DXY as investorssold and bought currencies considered riskier.

"You couldn't get a more 'risk on' ranking of G10 currenciesthan we have this morning," said Kit Juckes, Societe Generale'sforeign exchange analyst, citing gains for the Australian andNew Zealand dollars and the Swedish SEK=D3 and Norwegiancrowns NOK=D3 .

With the dollar weaker and optimism improving, emerging-market currencies also rose, with the rand strengthening 1percent ZAR= .

Concern about Chinese economic growth and global growth haveweighed on sentiment in recent months, although 2019 has alsoseen a rally in risk assets after the U.S. Federal Reservepaused in its interest rate increases.

Sterling rose 0.3 percent towards $1.31GBP=D3 as tradersconsidered whether the British government might delay Brexitshould Prime Minister Theresa May fail to secure support for herwithdrawal agreement.

May has put off a vote on her Brexit deal until as late asMarch 12 - 17 days before Britain's official departure date fromthe European Union - exacerbating fears of a no-deal Brexit.

The Japanese yen was unchanged against the dollar at 110.64yen per dollar JPY=EBS . (Editing by Larry King) ((thomas.wilkes@thomsonreuters.com))


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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