The dollar held steady against most major currencies on Thursday as traders moved to the sidelines in advance of this weekend's G20 summit where China and the United States may reach a truce on their trade conflict.
The world's two largest economies have agreed to a tentative truce in their trade dispute, Hong Kong's South China Morning Post cited sources as saying. U.S. President Donald Trump and Chinese President Xi Jinping are scheduled to meet on Saturday.
The report eased fears that Trump would impose additional tariffs on $300 billion on Chinese goods, but financial markets remain on edge about the trade talks, analysts and traders said.
"It's just a lot of noise until there is a deal," said Minh Trang, senior foreign exchange trader at Silicon Valley Bank in Santa Clara, California. "We are in a holding pattern."
Traders shrugged off a U.S. government report that showed the economy expanded at a 3.1% annualized pace in the first quarter, unchanged from the government's estimate last month.
In late U.S. trading, the index that tracks the dollar against the euro, yen, sterling and three other currencies was little changed at 96.206, holding above a three-month low of 95.843 reached on Tuesday.
The index broke below its 200-day moving average last week, which analysts cite as bearish for the dollar, after the Federal Reserve signaled it was prepared to lower interest rates to combat the risk from global trade tensions and sluggish domestic inflation.
The dollar index was on track for it first quarterly loss since the first quarter of 2018. China's offshore yuan rose 0.20% to 6.8742 per dollar , helping the renminbi back toward the six-week high of 6.8370 yuan per dollar touched last week.
The offshore yuan, however, has weakened 2.26% in the second quarter.
Whether Trump and Xi strike a trade truce this weekend could shape expectations on Fed policy in the coming months, analysts said.
Traders have priced in the probability the Fed would lower rates in July and might cut rates at least three times by year-end, according to interest rates futures calculated by CME Group's FedWatch program.
The yen edged up 0.03% to 107.755 per dollar. The Japanese currency has risen a solid 2.7% against the greenback in the second quarter, boosted by expectations of Fed rate cuts and the trade war.
Rising tensions between Iran and the United States has also stoked safe-haven demand for the Japanese currency.