* Pound heads for largest weekly drop vs dollar since Oct.
* Greenback steadies after two slippery weeks
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Westbrook and Stanley White
SYDNEY, Dec 20 (Reuters) - Sterling was precariously poised
as it headed for its worst week in more than two years on
Friday, hobbled by familiar fears of a chaotic British exit from
the European Union, while firm data helped the dollar arrest its
recent slide.
Overnight the pound GBP= slipped below $1.30 for the first
time in a fortnight. It was last quoted at $1.3022 as worries
grow about whether a deal can be secured before the December
2020 hard deadline.
Cable has given up all the gains won after Prime Minister
Boris Johnson was re-elected last week and has slumped 2.3%
against the dollar since Monday. It has fared even worse against
the euro, headed for its largest weekly loss since July 2017.
EURGBP= .
"The market was always a little bit naive in a way to think
that a Tory election win was going to remove the fog of Brexit,"
said Ray Attrill, head of FX strategy at National Australia
Bank. "There were obviously some longs in weak hands that got
forced out."
More than three years since Britain voted to exit the
European Union in a 2016 referendum, Johnson's government will
leave the political bloc at the end of January and has set Dec.
2020 as a hard deadline to reach a trade agreement. Uncertainty over that prospect helped the safe-haven Swiss
franc to its highest in a month against the euro at 1.0881
francs EURCHF=R and its strongest against the dollar since
August CHF= .
Elsewhere, the greenback found broad support. Solid housing
starts and firmer-than-expected manufacturing data this week
helped to halt two weeks of declines against a basket of
currencies .DXY . The dollar index rose slightly to 97.440.
Nobody expects the U.S. Federal Reserve to move interest
rates anywhere when it meets in January. FEDWATCH
The dollar last traded a whisker stronger on the Japanese
yen JPY= at 109.31 and a tiny bit weaker against the euro
EUR= at $1.1116. The dollar has gained 0.7% on the yen this
week.
The best performer of the last 24 hours has been the
Australian dollar AUD=D3 , which rallied half a percent as
strong jobs data prompted traders to pare back bets on a
interest rate cut when the central bank meets in February.
Expectations that the Reserve Bank of Australia will reduce
rates fell from about 60% to just under even. 0#YIB
"That's a notable change. When you drop under 50% the
psychology changes a little bit," said Westpac FX analyst Sean
Callow. "I can see why people are not quite convinced," said
Callow, who is sticking with a forecast for a cut.
The Aussie was last steady near a one-week high at $0.6883.
The New Zealand dollar NZD=D3 was stable at $0.6607, in a week
where weakness in milk prices was offset by another round of
positive economic data.
The Chinese yuan CNH= held just on the strong side of the
symbolic 7-per-dollar as China's unveiling of new tariff
exemptions on U.S. chemical and oil product imports supported
optimism about the Sino-U.S. trade detente. China kept its lending benchmark rate unchanged on Friday,
but markets widely expect further monetary easing in 2020 to
arrest an economic slowdown.
The one-year loan prime rate (LPR) CNYLPR1Y=CFXS was
unchanged at 4.15% from the previous monthly fixing. The
five-year LPR CNYLPR5Y=CFXS also remained the same at 4.80%.
On Wednesday the People's Bank of China lowered rates on
14-day reverse repurchase agreements to ease monetary
conditions.