FOREX-Cautious trade optimism offers some support for dollar

* U.S., Chinese negotiations describe talks in positive terms

* Yen sold, Aussie and kiwi rally

* Moves slight as caution abounds

By Tom Westbrook

SINGAPORE, Sept 23 (Reuters) - The dollar was supported on Monday, with the market's risk appetite delicately balanced after talks in Washington between U.S. and Chinese trade deputies were described as "productive".

The greenback gained against the safe-haven yen, but edged lower versus trade-exposed currencies, such as the Australian and New Zealand dollars, which rallied on the cautious risk-on mood.

Moves were relatively slight, however, with volumes dampened by a public holiday in Japan and by the anticipation that central banks on both sides of the Tasman Sea will sound dovish in scheduled remarks this week.

"I think there's still a lot of nervousness around," said Shane Oliver, chief economist at AMP Capital in Sydney, citing Middle East tensions and the whipsawing fortunes of the U.S-China trade dispute as key drivers.

"These things have a habit of escalating and de-escalating and then escalating is a bit finely balanced at the moment," he said.

The dollar rose a touch over 0.1% to buy 107.70 Japanese yen . It gave up the roughly same amount of ground to the Australian and New Zealand dollars, trading at $0.6768 on the Aussie and $0.6268 to the kiwi.

Against a basket of currencies the dollar was mostly flat at 98.500 and it held steady at $1.1017 per euro.

The British pound held at $1.2476 after dropping from a two-month high on Friday when Ireland's foreign minister said Britain and the European Union were not yet close to a Brexit deal.

A U.S.-China trade breakthrough had seemed unlikely after President Donald Trump told reporters on Friday he was "not looking" for a partial deal, and Chinese officials then cancelled goodwill visits to U.S. farmers.

But both sides later published positive statements, with the U.S. Trade Representative's office describing the talks as "productive" and China's Commerce Ministry calling them "constructive." October's high-level talks remain on track.

China's yuan strengthened 0.2% to 7.1025 per dollar in offshore trade, though few are expecting much of a rally or for the mood to hold should any signs of doubt emerge over a breakthrough in U.S.-China trade negotiations.

"At some point the fundamentals will take over," said Mathan Somasundaram, a strategist at brokerage Blue Ocean Equities in Sydney. "(The talks) are bringing back a bit of risk-on...but I think we will be in a bit of a holding pattern waiting to see."

September manufacturers' surveys in Europe and the United States due later on Monday are also likely to provide the latest insight into the state of a world economy hit by slowing global demand and the trade war.

The Chicago Fed National Activity Index is also due, while New York Fed President John Williams makes a scheduled speech after the central bank on Friday said it plans more intervention in the U.S. funding market to bolster dollar liquidity. (Editing by Jacqueline Wong)