(New throughout; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, 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, as investor confidence in global
growth prospects and the Phase 1 U.S.-China trade deal spurred a
risk-on move.
U.S. President Donald Trump said on Tuesday that the first
phase of an American trade deal with China would be signed on
Jan. 15 at the White House.
The dollar index .DXY was down 0.36% to 96.388, its fourth
consecutive session in the red and its weakest level since July
1. The Phase 1 trade agreement, which was reached earlier in
December, has reduced demand for the safe-haven currency,
pulling the dollar down 1.92% in the last month.
December's move has undone much of the dollar's strong 2019
thanks to the relative outperformance of the U.S. economy and a
long period of uncertainty in the negotiations between
Washington and Beijing.
"Weakness in the U.S. dollar towards the end of this year
has coincided with the renewed expansion of the Fed's balance
sheet and the paring back of pessimism over the outlook for
global growth," MUFG analysts said.
On the last trading day of the year, the dollar was up just
0.25% for 2019 compared to 4.4% in 2018. At the end of November,
it was up 2.18% for the year. The shift also reflects investor
bets that the dollar will weaken further in 2020.
"Everybody has been wanting to short the dollar. It has been
the most frustrating trade of the year. I think for the most
part, there's not a lot of resistance going back into that
trade. If we look into the top 2020 calls for FX, it's going to
be short the dollar," said Marvin Loh, senior global macro
strategist at State Street Global Markets.
Buoyant end-of-year sentiment encouraged investors to buy up
currencies linked to trade and global growth, sending the
Australian dollar AUD= , Chinese yuan CNH= and Scandinavian
crowns to multi-month or multi-week highs against the greenback.
Investors' appetite for risk also helped drive the euro
EUR= to $1.124, a five-month high. It was last trading 0.27%
higher at $1.123.
Signs that the euro zone economy may be stabilizing have
lifted the common currency in recent weeks as investors unwound
short positions. Sterling GBP= hit 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.