FOREX-Dollar turns higher as U.S. stocks weaken

* Aussie dollar, Chinese yuan hit 2-1/2-year high vs dollar
* Sterling falls as focus remains on Brexit
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Recasts, adds new comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 9 (Reuters) - The dollar rose in choppy
trading on Wednesday for a fourth straight session, as selling
momentum eased with stocks under pressure, but positive vaccine
news and prospects of more U.S. fiscal stimulus next year should
keep pressure on the greenback.
In midday trading, the dollar gained 0.2% against a basket
of currencies =USD at 91.067. It reached an April 2018 low of
90.47 last Friday.
It hit session highs versus the yen JPY=EBS and Swiss
franc CHF=EBS .
The euro, on the other hand, fell 0.2% to $1.2079
EUR=EBS , but was still on track for an annual gain of nearly
8%, its largest since 2017.
"This move of dollar weakness is starting to run out of
steam in the short run," said Ranko Berich, head of market
analysis at Monex Europe in London. "Euro/dollar is rejecting
last week's highs, for example."
Riskier currencies, including the Australian and New Zealand
dollars AUD=D3 as well as the Chinese yuan CNY=CFXS , led
gains against the dollar, but have come off their highs. Both
the Aussie unit and Chinese currency hit 2-1/2-year peaks
earlier.
The dollar's downtrend, however, remained the pervasive
sentiment.
With U.S. coronavirus cases exceeding 15 million on Tuesday,
regulators moved a step closer to approving a COVID-19 vaccine,
while Britain started inoculating people on Tuesday.
Investors are also tracking negotiations over U.S.
coronavirus aid, with the Trump administration proposing a $916
billion package on Tuesday after congressional Democrats
rejected a slimmer plan. "The narrative that the market is working off for now is
that there would be a reflationary environment in the United
States with the additional stimulus," Monex's Berich said. "This
environment overall is conducive to dollar weakness."
The dollar's losses overall have been most severe versus the
euro in recent weeks as economic activity data suggested Europe
is outperforming the United States.
German investor sentiment rose in December on expectations
that vaccines against the coronavirus will boost the economic
outlook, a survey showed this week. YUAN
The dollar dropped to 6.5198 yuan in onshore trading
CNY=CFXS , its lowest since June 2018, putting the yuan up by
more than 10% from its May lows, boosted by the softer dollar
and steady inflows into Chinese stocks and bonds. CNY/
Sterling was volatile GBP=D3 , up 0.2% against the dollar
at $1.3379 before a Wednesday dinner between British Prime
Minister Boris Johnson and European Commission President Ursula
von der Leyen in Brussels that is seen as a last-ditch attempt
to salvage a Brexit trade deal. "Bottomline, a Brexit trade deal is the likeliest outcome,
although a complete collapse in talks cannot be ruled out," said
Monex's Berich.
Rumblings in the money markets grew with swap markets
indicating a growing demand for dollars heading into the end of
the year. Three-month euro cross-currency basis swap spreads
EURCBS3M=ICAP widened to minus 27 basis points, but were well
below a March peak of nearly minus 90 basis points.
The Australian dollar rose to its highest since June 2018
against the greenback and was last up 0.6% at US$0.7451.

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