* Dollar steady, risk appetite up after Powell speech
* Mexican peso rises as NAFTA talks seen nearing agreement
* Turkish lira slides 3 percent as markets reopen
* Graphic: World FX rates in 2018 (Adds quote, updates prices)
By Tom Finn
LONDON, Aug 27 (Reuters) - The dollar steadied on Monday asrisk sentiment improved following reassuring Federal Reservecomments and signs U.S. and Mexican negotiators were homing inon a common position on the North American Free Trade Agreement(NAFTA).
At a symposium at Jackson Hole, Wyoming, Fed chair JeromePowell on Friday emphasised the central bank's push to raiseinterest rates despite President Donald Trump's criticism ofhigher borrowing costs. The Treasury yield curve reached its flattest level since2007 - a factor seen as reducing support for the dollar - in thewake of Powell's speech.
His comments did little to change market expectations forrate hikes in September and December and disappointed somedollar bulls hoping for a more hawkish message.
"Some in the market were wrongfooted because they thoughtthe Fed might shift towards an auto-pilot mode (approach to ratehikes) as it did in 2004. Obviously, Powell prefers a gradualapproach," said Ulrich Leuchtmann, head of FX and emergingmarket research at Commerzbank AG in Frankfurt.
"The return of risk appetite is negative for the dollar andits safe-haven appeal."
The dollar index against a basket of six major currencies was broadly flat at 95.254 at 1100 GMT, after slippingmore than 0.5 percent in the previous session.
Adding to the risk-on mood, U.S. and Mexican tradenegotiators appeared close to reaching a common position onNAFTA, with Mexico's economy minister saying on Sunday thattalks had "continued to make progress". "There is growing optimism that a US/Mexican agreement canbe reached ...which in turn would allow Canada to re-join talksand progress to be made overall," said Kit Juckes, foreignexchange strategist at Societe Generale.
"We're never more than a tweet away from disaster on tradenegotiations but for now, there's optimism."
The Mexican peso was up 0.7 percent at 18.81 perdollar. Talks are scheduled to resume on Monday.
A prospective U.S. deal with Mexico "takes a little bit ofglobal trade war risk off the table", said Robert Carnell, chiefeconomist and head of research, Asia-Pacific at ING.The euro was little changed at $1.1607 after goingas high as $1.1654, its strongest since Aug. 2. The singlecurrency advanced more than 0.7 percent on Friday.
The Chinese yuan extended its rally in the onshore market toas high as 6.8061 per dollar, its strongest sinceAug. 8. The yuan had surged about 0.8 percent in onshore trade onFriday after the People's Bank of China said it was adjustingits methodology for fixing the yuan's daily midpoint, amid broaddollar strength and ongoing trade tensions between Washingtonand Beijing. In emerging markets, the Turkish lira weakened 3 percentagainst the dollar on Monday after a week-long holiday, hit bypersisting concern about a diplomatic rift with Washington overa detained U.S. pastor. The slide as local trading resumed left the lira down around38 percent this year.
A broad retreat in emerging market currencies earlier thismonth had been a key source of strength for the greenback.
(Editing by Alison Williams and John Stonestreet)
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