FOREX-Euro gains and sterling shines as growth optimism cheers investors

Published 31/12/2019, 13:20
© Reuters.  FOREX-Euro gains and sterling shines as growth optimism cheers investors
DXY
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* Dollar ends 2019 at 6-month low, losing ground vs rivals

* Euro at 4-1/2 month highs, Aussie, Kiwi at 5-month highs

* Growth, trade optimism marks turnaround for many

currencies

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details, latest prices)

By Olga Cotaga

LONDON, Dec 31 (Reuters) - The euro, the pound and a clutch

of trade-sensitive currencies rallied as the dollar slid to a

six-month low on Tuesday, with investors confident that global

growth prospects are improving and U.S.-China trade relations

significantly better.

After staying strong for much of 2019 thanks to the relative

outperformance of the U.S. economy and investors' preference for

a safe-haven currency amid the trade dispute between Washington

and Beijing, the dollar's gains for the year have shrivelled in

December.

The buoyant end-of-year sentiment enocouraged investors to

buy up currencies linked to trade and global growth, sending

many such as the Australian dollar, Chinese yuan and

Scandinavian crowns to multi-month or multi-week highs against

the greenback.

The dollar index was last down 0.3% at 96.435 .DXY , its

weakest since July 1.

In thin volumes on the last day of the decade, currencies

were also more volatile than many had expected.

Analysts did not attribute the moves to any specific new

developments.

"I can't see much reason for the movement in the FX market

except end-year position squaring, or just being careful and

cutting positions ahead of the New Year's holiday and the start

of 2020. As a result I wouldn't draw any big conclusions from

it," said Marshal Gittler, currency analyst at ACLS Global.

Chinese Vice Premier Liu He will visit Washington this week

to sign a Phase 1 trade deal with the United States, the South

China Morning Post reported on Monday. White House trade adviser Peter Navarro said on Monday the

trade deal would likely be signed in the next week, but that

confirmation would come from President Donald Trump or the U.S.

trade representative. Investors' appetite for risk helped drive the euro EUR=EBS

up 0.3% to $1.1230, a new 4-1/2-month high.

Signs that the euro zone economy may be stabilising have

lifted the common currency in recent weeks as investors unwound

short positions, though the currency has shed around 2% of its

value against the dollar in 2019. Latest CFTC data shows that hedge funds held $9.16 billion

of euro shorts, far less than the $14.84 billion seen in May.

EURNETUSD=

The U.S. dollar was weak across the board, cutting 2019

gains for the index that tracks the greenback against a basket

of currencies to 0.3% .DXY .

MUFG analysts saw a "bearish technical development for the

U.S. dollar that signals an increasing risk of further weakness

ahead".

"Weakness in the U.S. dollar towards the end of this year

has coincided with the renewed expansion of the Fed's balance

and the paring back of pessimism over the outlook for global

growth," they said.

Versus the Japanese yen, the dollar fell to a near

three-week low of 108.50 yen JPY=EBS and was last down 0.4%.

"STAND OUT PERFORMER"

Against the Chinese yuan, it shed 0.4% to 6.9586 in the

offshore market CNH=EBS , a 2-1/2-week low, as strong Chinese

economic data helped boost the Chinese currency. The Australian dollar climbed 0.3% to a new five-month high

of $0.7014 versus the U.S. dollar AUD=D3 .

The New Zealand dollar firmed another 0.2% to a 5-month high

NZD=D3 of $0.6742. MUFG analysts noted that the currency

"remains the stand out performer of the last quarter, surging

nearly 8% over the past three months, largely on the back of

more positive sentiment about global trade".

For 2019, however, the Kiwi is up just 0.4%.

Scandinavian currencies also strengthened against the

greenback following all-time lows seen this year on the back of

global growth fears sparked by the U.S.-Chinese trade disputes.

Sterling hit new two-week highs against the dollar, although

the possibility of a 'no-deal' Brexit at the end of 2020 means

the currency is still not close to where it was on Dec. 12, the

day Prime Minister Boris Johnson won the British election.

The pound galloped 0.8% to as high as at $1.3212 GBP=D3

and was 0.5% stronger against the euro at 85 pence EURGBP=D3 .

Sterling has gained around 3.5% against the dollar in 2019

and 5.4% versus the euro as fears of an imminent disorderly exit

from the European Union eased and then lifted with the passing

of Johnson's Brexit withdrawal agreement in parliament.

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