* Dollar index edges lower
* Trade war headlines continue to hog market spotlight (New throughout, updates rates and adds comments post-U.S. market open; new byline, changes dateline from London)
By Saqib Iqbal Ahmed
NEW YORK, Nov 21 (Reuters) - The dollar edged lower against other major currencies on Thursday, with investors focused on the latest developments in a bitter 16-month long trade dispute between the United States and China that has weighed on the world economy.
Risk sentiment improved a little on Thursday after a report in the South China Morning Post said the United States could delay tariffs on Chinese imports even if a deal has not been reached by Dec. 15, when tariffs kick in on goods including electronics and Christmas decorations.
"The U.S. dollar is trading mostly lower as currency investors react to positive China trade headlines - China expressing 'cautious optimism' on reaching a Phase 1 deal and Beijing inviting U.S. negotiators for more talks," Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said in a note.
The dollar index, which compares the dollar against six major currencies, was down 0.06% at 97.873.
Investors were taking heart from a report in the Wall Street Journal that China has invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing.
Chinese Vice Premier Liu He, also the chief trade negotiator, said he was "cautiously optimistic" on a phase one deal, according to a report by Bloomberg.
Increased trade tensions between Washington and Beijing have generally been supportive of the dollar as investors view the United States to be in better shape than other economies to weather a trade war.
On Wednesday, the U.S. House of Representatives passed two bills to back protesters in Hong Kong and send a warning to China about human rights, with President Donald Trump expected to sign them into law.
"The bills approved by the U.S. Congress regarding Hong Kong further antagonize the relationship, revealing the confrontation between the U.S. and China transcends the Trump Administration," said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Despite the support the dollar has enjoyed from safe-haven flows due to increased trade tensions, the greenback may be set to weaken, Scotiabank's Osborne said.
"We continue to view the longer-run outlook for the U.S. dollar as more challenging amid slowing growth and increasing political uncertainty," he said.
Sterling was down 0.5% against the greenback after British opposition leader Jeremy Corbyn unveiled his election manifesto on Thursday setting out how a Labour government would transform Britain with "the most radical and ambitious plan" in decades.
(Reporting by Saqib Iqbal Ahmed; Editing by David Clarke)