* Dollar marginally higher with Fed in view
* Euro scales 10-day high
* Investors prepare for U.S-China talks, Brexit vote
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh (Updates prices)
LONDON, Jan 28 (Reuters) - The euro climbed to a 10-day high on Monday as investors sold the dollar and prepared for volatile markets before U.S.-China trade talks and a Federal Reserve policy decision.
Investors are focused on Wednesday’s Fed meeting when policymakers are expected to signal a pause in their tightening cycle and to acknowledge growing risks to the U.S. economy.
That could weigh on the dollar, which has fallen 1 percent since late December, after enjoying a boost from the Fed’s four rate increases in 2018.
On Monday, the dollar edged down against most major currencies. Traders are awaiting news from U.S.-China talks on Tuesday and Wednesday to see if the world’s largest economies can reach a compromise on trade.
“Unless there is a breakdown in negotiations, we suspect the cautiously risk-positive environment can continue - which should favour higher-yielding, under-valued emerging-market currencies against the dollar,” said Chris Turner, head of foreign exchange strategy at ING in London.
The dollar index, a gauge of its value versus six major currencies was lower at 95.798, after falling 0.8 percent on Friday.
A deal last week to reopen the U.S. government for now after a prolonged shutdown reduced investor demand for the safety of the dollar.
“The general direction for the dollar is still down and markets will be taking cues from the FOMC this week,” said Sim Moh Siong, currency strategist at Bank of Singapore. “The Fed will most likely keep rates steady this year, given the state of economic growth outside the U.S.”
The dollar fell 0.1 percent versus the offshore yuan to 6.7406. The rally in the yuan also fuelled a bounce in the Australian dollar, which gained 0.18 percent versus the dollar to $0.7195.
The euro managed to cling to last week’s 0.4 percent gain and traded at $1.1416 on Monday.
Economic data out of Germany and France has been weaker than expected, and analysts expect the European Central Bank to remain dovish for an extended period.
But traders believe Europe’s slowdown and a dovish ECB are priced into the euro, which has traded in a $1.12-$1.16 range over the past three months.
Sterling drifted lower on Monday after posting its biggest weekly rise in more than 15 months last week, as investors consolidated positions before votes in the British parliament on Tuesday aimed at breaking a Brexit deadlock.
Analysts expect sterling to remain volatile. Britain is set to leave the European Union on March 29, but the British parliament is far from agreeing the terms of its leaving. (Reporting by Tom Finn; editing by Toby Chopra, Larry King)
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