By Rae Wee SINGAPORE (Reuters) -The dollar held steady on Tuesday as U.S. President Donald Trump's watered down rhetoric against tariffs on China and a potential meeting with his Chinese counterpart raised hopes of de-escalation in tensions between the two economic heavyweights. Currency markets were calmer in early Asian trade after a chaotic Friday session when Trump abruptly announced additional levies of 100% on China's U.S.-bound exports, only to later sound more conciliatory over the weekend. U.S. Treasury Secretary Scott Bessent also said on Monday that Trump remains on track to meet Chinese leader Xi Jinping in South Korea in late October. All that breathed new life into the dollar, which in turn kept the euro below the $1.16 level to trade at $1.1566. Sterling eased 0.06% to $1.3328, while the New Zealand dollar fell anew to hit a six-month low of $0.57145. "There is a mutual desire, or some sort of an off-ramp, and also a deal to prevent the bilateral relations from really spiralling out of (control), particularly because I think both the U.S. and China understand very clearly they cannot simply wish away the other's leverage," said Homin Lee, senior macro strategist at Lombard Odier. "We think, at the end of the day… a re-escalation path without any kind of an endgame in mind, may be too punitive for both sides. So we suspect that there will be an attempt to achieve an off-ramp." Against a basket of currencies, the dollar ticked 0.04% higher to 99.34. The Aussie was little changed at $0.6516, while the yen fell roughly 0.2% to 152.57 per dollar. Markets in Japan returned from a long weekend on Tuesday to lingering political uncertainty at home, after Sanae Takaichi's bid to become the nation's first female prime minister was thrown into doubt on Friday when her ruling party's junior coalition partner quit. While the move halted the yen's steep slide as investors assessed the chances of huge fiscal largesse under the new premiership, it continues to languish near eight-month lows. "If you ask me, given the current interest rate differential between the U.S. and Japan, which should be the primary driver of the exchange rate as well, dollar/yen should not be at 152, so I do expect this trend to reverse pretty soon," said Nigel Foo, head of Asian fixed income at First Sentier Investors, who expects the yen to strengthen eventually. In cryptocurrencies, bitcoin was down 0.36% at $115,380.19, after having tumbled more than 6% last week as risk sentiment took a hit. Ether fell 0.77% to $4,256.42, having similarly lost nearly 8% of its value last week. Market participants said the crypto sector on Friday saw more than $19 billion in liquidations across leveraged positions as panic selling and low liquidity triggered sharp swings. (Reporting by Rae WeeEditing by Shri Navaratnam)
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