FOREX-Euro, Aussie gain, disregarding Trump's threat to block stimulus

* Dollar dips despite Trump threat over stimulus package
* Euro heads back towards $1.22, Aussie adds 0.7%
* Sterling higher on hopes a Brexit deal is nearing
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tommy Wilkes
LONDON, Dec 23 (Reuters) - The euro rose back towards $1.22
and the dollar declined on Wednesday as foreign exchange traders
looked beyond U.S. President Donald Trump's threat not to
approve a $892 billion COVID-19 aid package.
Trump said the long-awaited stimulus package should be
amended to increase the amount in the stimulus checks --
potentially disrupting the bill. But foreign exchange markets were little changed, with the
dollar edging lower and currencies deemed riskier, such as the
Australian dollar, making solid gains.
"The financial markets have not reacted notably to this
threat from President Trump to block the package – our sense is
there remains an expectation that Trump will sign it in the
end," MUFG analysts said in a research note.
They added that the market's indifference could shift to
risk aversion and a rebound for the dollar if Republicans in the
Senate blocked Trump's larger stimulus demand.
By 0835 GMT, the dollar was 0.1% lower against a basket of
currencies =USD .
The dollar index has dropped more than 6% this year as
investors bet the U.S. Federal Reserve will keep its policy
ultra-easy. Expectations for further declines by the dollar are
helping buoy stock markets and emerging-market currencies.
euro climbed 0.2% to $1.2183 EUR=EBS .
Sterling rose nearly 0.5% to $1.3442 GBP=D3 amid
speculation the European Union and Britain will announce a
Brexit trade deal on Wednesday. The pound has been jolted up and down on hopes for a deal
before Britain's Brexit transition period ends on Dec. 31. Most
foreign exchange traders think a deal will be agreed, even with
so little time left to forge and ratify an arrangement.
"The market is just waiting for the final result of Brexit
talks, and in the meantime being swung by conflicting
headlines," said Shinichiro Kadota, senior currency strategist
at Barclays Capital in Tokyo. "Sterling will remain volatile."
Elsewhere, the Australian dollar gained 0.7% to as high as
$0.7575 AUD=D3 , boosted by signs that a small COVID-19
outbreak in Sydney would be contained.
The dollar dropped 0.2% against the Japanese yen JPY=EBS ,
another safe haven, to 103.44.
The U.S. currency was down 0.2% versus the Chinese yuan in
the offshore market CNH=EBS to 6.5266.

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