NEW YORK - The dollar fell against a basket of currencies on Friday as the prospect of a China-U.S. trade deal and an election victory for Britain's Brexit-backing Conservative Party appeared to clear the fog on the global investment horizon, sapping safe-haven demand for the greenback.

Washington has set its terms for a trade deal with China, offering to suspend some tariffs on Chinese goods and cut others in exchange for Beijing's buying more American farm goods, U.S. sources said on Thursday.

Neither Washington nor Beijing have made official statements about reports of the deal.

A deal could dial down tensions between the United States and China, providing relief to investors who have been buffeted for months by worries that a full-blown trade war would pressure global economic growth.

The dollar index, which measures the greenback against six major currencies, was down 0.45% to 96.956.

"Even the appearance of a resolution to this phase of the trade war means a 'risk-on' environment," Marshall Gittler, strategist at ACLS Global, said in a note.

Appetite for trade-sensitive risky currencies was capped, however, by a lack of confirmation from Beijing whether it is on board with Washington's proposal, although officials were to hold a news briefing on Friday night local time to update progress on the talks, the State Council Information Office said.

In the hours since U.S. sources said terms for a phase-one deal were in place, Beijing's silence had raised questions over whether the two sides could agree on a truce in their trade war before a new round of tit-for-tat tariffs takes effect on Sunday.

"Only if it's actually signed and it's really official, then the market will fully price it in," said Commerzbank FX strategist Thu Lan Nguyen.

Against the Japanese yen, which tends to draw investors during times of geopolitical or financial stress as Japan is the world’s biggest creditor nation, the dollar was about flat on the day.

Although the offshore yuan was initially boosted on trade deal hopes, it was last down about 0.7% versus the dollar.

Meanwhile, the pound surged on Thursday as Prime Minister Boris Johnson's Conservative Party won a resounding election victory that markets believe makes an orderly British exit from the European Union all but certain.

Sterling reached a 19-month high versus the dollar and its strongest levels against the euro since shortly after the 2016 Brexit referendum. The pound was last up 1.31% against the dollar.

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Elizabeth Howcroft in London) ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 646 223 6054; Reuters Messaging: saqib.ahmed.thomsonreuters.com@reuters.net))