SINGAPORE, Oct 16 (Reuters) - The dollar fell on Thursday as the trade war between China and the United States weighed on investor sentiment, and speculation of interest rate cuts this year weighed on the greenback.

The euro rose 0.14 percent to $1.1664 in early trading, hitting a one-week high. The yen climbed to a one-week high of 150.52 against the dollar.

The dollar index, which measures the greenback's performance against six other currencies, fell 0.16 percent to 98.512, heading for a weekly decline of 0.33 percent.

Investors are focused on the trade dispute between the world's two largest economies, with US officials criticizing China's expansion of rare earth export restrictions, describing them as a threat to global supply chains.

China's Ministry of Commerce defended the controls, citing US measures on Chinese goods and companies and describing US criticism as hypocritical.

Despite the tit-for-tat measures, US President Donald Trump still expects to meet Chinese President Xi Jinping in South Korea this month, according to US Treasury Secretary Scott Besant.

Both sides continued to impose low tariffs and maintain flows of rare earth minerals under a six-month trade truce that has been extended for 90 days several times. Bessent indicated the possibility of a longer extension.

The Australian dollar fell 0.4 percent to $0.6485 after data showed unemployment hit a nearly four-year high in September, strengthening expectations of an interest rate cut.

As the US government shutdown enters its third week, investors are focusing on policymakers' comments to gauge the Federal Reserve's near-term direction.

Traders expect 48 basis points of monetary easing this year, indicating increased confidence in two more interest rate cuts in 2025.

The US Federal Reserve said on Wednesday that economic activity in the country had seen little change, and that employment had been largely stable in recent weeks. However, there are signs of a weak labor market and a slight decline in spending.

Meanwhile, attention is also turning to political developments in Japan after parliament failed to set a date for a vote to elect a new prime minister.

The ruling Liberal Democratic Party chose Sanae Takaichi as its leader this month, but the path to becoming Japan's first female prime minister became more difficult after Komeito decided to end its coalition last week.

(Prepared by Rehab Alaa for the Arabic newsletter)