* U.S.-China trade deal close, Trump says; negotiations continue
* Sterling weakens after polls show Conservative lead is narrowing (Updates to U.S. afternoon)
By Saqib Iqbal Ahmed
NEW YORK, Nov 26 (Reuters) - The U.S. dollar was slightly lower against a basket of currencies on Tuesday as traders looked to the latest developments in the U.S.-China trade talks for direction and the shortened holiday week kept currency moves muted.
The United States and China are close to agreement on the first phase of a trade deal, U.S. President Donald Trump said on Tuesday, after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.
The Global Times, a tabloid run by the ruling Communist Party's official People's Daily, reported on Sunday that China and the United States were "moving closer to agreeing" on a "phase one" trade deal, even as Washington and Beijing had not agreed on specifics or the size of rollbacks of tariffs on Chinese goods.
"Does this tell us anything we didn’t know six, seven weeks ago? Hard to say. But I’ll believe when I see it," said Neil Wilson, chief market analyst at Markets.com.
The United States has imposed tariffs on Chinese goods in a 16-month long dispute over trade practices that the U.S. government says are unfair. China has responded in kind with its own tariffs on U.S. goods.
If both sides cannot reach an agreement soon, the next important date to watch is Dec. 15, when Washington is scheduled to impose even more tariffs on Chinese goods.
On Tuesday, data showed the U.S. goods trade deficit fell sharply in October as both exports and imports declined, pointing to a continued reduction in trade flows that has been blamed on the Trump administration's "America First" policy.
Data also showed U.S. consumer confidence fell for a fourth straight month in November amid worries about current business conditions and employment prospects, but remained at levels sufficient to support a steady pace of consumer spending.
The dollar index, which compares the greenback against six other major currencies, was down 0.08% at 98.246.
"Near-term escalation appears to be off the table, for the time being, despite Trump's threats to raise tariffs if there is no agreement," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "However, the fundamental disagreement is illustrated by Xi arguing for an equal deal while Trump claims that because China already has a large advantage, an agreement must favor the U.S," he added, referring to Chinese President Xi Jinping.
Against the yen, the dollar was up 0.12%. The U.S. currency had jumped to a two-week high against the safe-haven Japanese currency in Asian trading.
Overall, currency trading is slowing before the U.S. Thanksgiving holiday on Thursday, with traders increasingly pricing in tighter trading ranges for major currencies, analysts said.
Sterling was 0.26% lower at $1.2864 on Tuesday after a second opinion poll showed the Conservative Party's lead is narrowing before the British election next month.
Prime Minister Boris Johnson's Conservatives have led the opposition Labour Party and hopes that a Johnson victory would end more than three years of uncertainty over Brexit have lifted the pound, despite concern about a no-deal exit from the European Union.
(Reporting by Saqib Iqbal Ahmed; Editing by Steve Orlofsky and Leslie Adler)