FOREX-Dollar mired near 2 1/2-year low, sterling eyes last-ditch Brexit talks

* Dollar index near 2 1/2-year low, euro stays above $1.21
* Disappointing U.S. jobs data enhances stimulus hopes
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano and Kevin Buckland
TOKYO, Dec 7 (Reuters) - The dollar started the week on the
back foot on Monday after soft U.S. jobs data only solidified
expectations of a fresh economic package, while the British
pound eyed last-ditch trade talks between the United Kingdom and
European Union.
The dollar index stood little changed at 90.726 =USD ,
having hit a 2 1/2-year low of 90.471 on Friday. The euro
changed hands at $1.2133 EUR= , having climbed on Friday to as
high as $1.2177, a level last seen in April 2018.
Friday's U.S. jobs data showed non-farm payrolls increased
by 245,000 last month, the smallest gain since May, in a sign
the jobs recovery is losing momentum on the third wave of
coronavirus infections. Yet traders perceived the data as putting pressure on
Washington to pass a new round of stimulus to help the
coronavirus-battered economy, keeping overall risk appetite
intact and capping the U.S. dollar against riskier currencies.
"When risk appetite is in a good place, like it is now,
demand for the U.S. dollar is going to be weaker," said Ray
Attrill, head of foreign exchange strategy at National Australia
Bank in Sydney. "Further dollar depreciation is baked in the
cake."
Talks aimed at delivering a fresh infusion of coronavirus
relief gathered momentum in the U.S. Congress on Friday, as a
bipartisan group of lawmakers worked to put the finishing
touches on a $908 billion bill they hope to get through this
week. The spectre of fresh borrowing boosted the 10-year U.S.
Treasuries yield to an 8 1/2-month high of 0.986% on Friday,
helping lift the dollar against the yen to 104.20 yen JPY= .
The U.S. Federal Reserve is unlikely to rush to ramp up
stimulus at its meeting next week, with Chicago Federal Reserve
Bank President Charles Evans on Friday saying it would take
until springtime to see the effects of a vaccine roll-out and
gauge the economic trajectory. The European Central Bank sets policy on Thursday.
The offshore yuan stood at 6.5184 per dollar CNH=D4 , just
shy of its 2 1/2-year high of 6.5070 set on Friday.
Chinese policymakers are comfortable with the yuan's rise as
the country's economic rebound accelerates and the central bank
gives the market greater leeway in setting the currency's value,
sources told Reuters. The yuan, also known as the renminbi, moved little after
data showing China's exports rose at the fastest pace in nearly
three years in November. Sterling traded little changed at $1.3422 GBP=D4 , stepping
back from 2 1/2-year high of $1.3540 touched on Friday as
investors looked to talks between Britain and the EU this week
to avert a chaotic parting of ways at the end of the year.
Earlier it fell to as low as $1.3360 after weekend talks
stalled on three thorny issues. British Prime Minister Boris Johnson and European Commission
President Ursula von der Leyden are due to hold a call on Monday
evening in the hope that, by then, differences over fishing
rights waters around the United Kingdom, fair competition and
ways to solve future disputes will have narrowed.
"While it is hard to predict how the negotiations will go, I
suspect sterling will be well-supported unless we have a
complete breakdown in the talks," said Shinichiro Kadota, senior
currency strategist at Barclays Capital in Tokyo.