TOKYO, Nov 18 — Major currencies were off to a cautious start today as market players looked to whether Washington and Beijing can soon sign off on a deal to end their trade war that has been a drag on the global economic growth.

Chinese state media Xinhua said yesterday the two countries had “constructive talks” on trade in a high-level phone call on Saturday, but it gave no further details.

Against the yen, the dollar was traded at ¥108.75, recovering from 108.235 touched on Thursday as rising hopes of a US-China trade deal undercut the yen.

The currency faces a resistance around 109.00, where it has its 200-day moving average. A break-through there could open the way for a retest of its five-month high around 109.50 touched earlier this month.

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Rising risk appetite was mildly positive for the euro, which stood at US$1.10505, bouncing back from one-month low of US$1.0989 set on Thursday.

That helped to push down the dollar index to 97.980, near its lowest levels since November 7.

“Currencies will be driven by headlines related to the US-China trade issues. Markets are expecting some sort of answer to that soon,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

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The “phase one” deal was originally expected to be signed on the sideline of Asian-Pacific countries’ summit scheduled last weekend before the host nation Chile cancelled the event due to domestic riots.

The tariff war between the United States and China has already taken its toll on the world’s manufacturing sector.

Data from the US Federal Reserve on Friday showed the US manufacturing downturn deepened in October, with output at factories tumbling 0.6%, the most since May 2018, after dropping 0.5% in September.

US retail sales rebounded moderately in October but consumers did cut back on purchases of big-ticket household items like furniture and on discretionary spending.

Still, hopes of a US-China deal have kept investor optimism afloat, with US stock prices hitting a record high on Friday.

Elsewhere, sterling was extending its slow recovery to reach its highest levels in two weeks, trading at US$1.2919, up 0.12% so far on the day.

Investors will keep an eye on developments in Hong Kong, where police trapped hundreds of protesters inside a major university, sealing off roads in the area after almost two straight days of standoffs that have raised fears of a bloody showdown with both sides refusing to back down.

The turmoil could hit Hong Kong share prices and could dent risk-sensitive currencies in the region, such as the Australian dollar.

The Aussie traded down slightly at US$0.6815. — Reuters