FOREX-Dollar rises from 2 1/2-year lows, risk currencies retreat

* Dollar recovers from lowest in more than two years
* Euro hits fresh 2020 high
* Sterling falls on negative Brexit headline
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, Dec 2 (Reuters) - The dollar rose from a
two-and-a-half-year low on Wednesday as investors assessed the
likelihood of further fiscal stimulus in the United States,
while a rally in riskier currencies lost steam.
The Chinese yuan erased some gains after the New York Times
reported that U.S. President-elect Joe Biden will not
immediately act to remove the Phase 1 trade agreement President
Donald Trump signed with China. Against a basket of major currencies, the dollar index rose
0.2% at 91.34 =USD , off the lowest level since late April 2018
it hit overnight.
U.S. Treasury Secretary Steve Mnuchin and House of
Representatives Speaker Nancy Pelosi held stimulus talks for the
first time since the Nov. 3 election. A bipartisan group of
senators and House members proposed $908 billion worth of
coronavirus relief measures. Later on Wednesday, data including the U.S. ADP national
employment data and European Union unemployment rate are due.
"We have ADP employment data as the only standout in the US
calendar today, which should provide some direction for market
expectations ahead of Friday's payrolls," said FX strategists at
ING in a note to clients.
"Still, data is clearly playing second fiddle to vaccine and
stimulus news. Markets may retain an upbeat stance on the latter
for now as bipartisan talks resume, providing further support to
risk assets and reinforcing the bearish dollar argument."
In early trading in London, the euro set a 2020 high of
$1.2088 against the dollar, its highest since April 2018. It
last traded at $1.2060. EUR=EBS
The European Central Bank meets next week, and analysts say
the euro could be pressured as investors worry the ECB will act
to curb its rapid rise.
Jordan Rochester, FX strategist at Nomura, said the
euro/dollar may struggle for two reasons: speculative
positioning profit-taking and the possibility the ECB will cut
interest rates next week.
The Bank of Japan's deputy governor signalled the central
bank was ready to extend pandemic-response programmes, saying it
would "take additional easing steps without hesitation as
needed." Against the Japanese yen, the dollar rose 0.3% to 104.55
JPY=EBS .
Sterling fell after headlines the UK's post-Brexit trade
deal with the European Union "still hangs in balance".
The EU's Brexit negotiator told the 27 national envoys on
Wednesday that differences in UK trade talks persisted,
according to a senior EU diplomat who was present at the
closed-door briefing. The pound last traded half a percent lower to the dollar at
$1.3354 GBP=D3 .
The risk-sensitive Aussie gained to 0.7376 per dollar after
data showed Australia's economy rebounded more than expected in
the third quarter AUD=D3 . The New Zealand dollar traded at $0.7056, near
two-and-a-half-year highs. NZD=D3 .
The onshore yuan last changed hands at 6.5587 per dollar
CNY= .