* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Sept 20 (Reuters) - The U.S. dollar erased earlierlosses and rose on Friday after investors cut back shortpositions in the greenback as concerns about slower globalgrowth prospects and political tensions boosted its safe-havenappeal.
The dollar weakened after the Federal Reserve cut interestrates by a quarter-point on Wednesday and the currency's declinewas compounded by a spike in overnight U.S. repo rates that cutinto demand for dollars.
But market watchers say the slowdown in global growth andincreased tensions following the weekend attacks on Saudi oilfacilities were making the dollar more attractive, despite adovish policy stance from policymakers.
"As long as the outlook for global growth remains uncertainand geopolitical tensions don't ease, we expect the currenttrends in the FX market will continue," said Richard Falkenhall,a senior FX strategist at SEB. "Our forecasts point to furtherUSD strength, while smaller currencies remain weak this year."
The dollar rebounded 0.1% against an index of othercurrencies to 98.39, ending a two-week losing streak. Ithad fallen 0.1% in early London trading.
Markets focused on U.S.-China trade talks in Washington,taking place ahead of high-level discussions next month. Somesigns of progress were emerging.
Sterling was briefly the biggest gainer against the dollarbefore profit taking ahead of the weekend pulled the Britishpound lower.
European Commission President Jean-Claude Juncker said onThursday he thought Brussels could reach agreement with Britainon its departure from the European Union.
In early trading, the pound rose 0.5% to a two-month highagainst the dollar and to a four-month high against theeuro of 87.87 pence, but then gave up its gains totrade broadly flat on the day.
The Australian dollar rose to $0.6799 but remainednear the three-week low it reached on Thursday. The New Zealanddollar fell to $0.6285, its weakest since Sept. 3.
(Reporting by Saikat Chatterjee; editing by Larry King andDavid Clarke)