CORRECTED-FOREX-Sterling extends rise with Brexit deal in sight, dollar falls further

(Corrects title in third para to Ireland's foreign minister,
not prime minister)
* Pound extends gains as Brexit deal expected on Thursday
* Brexit optimism overshadows Trump's threat on stimulus
bill
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Yoruk Bahceli
AMSTERDAM, Dec 24 (Reuters) - Sterling extended gains on
Thursday as Britain and the European Union appeared on the cusp
of striking a trade deal, raising hopes the United Kingdom can
avoid a turbulent economic departure at the end of the year.
The dollar was on the back foot in holiday-thinned trading
as hopes for an agreement that would protect about $1 trillion
in annual cross-channel trade from tariffs and quotas sapped
demand for the safest assets.
The British pound extended gains and rose over 0.6% against
the dollar in early London trade, to $1.3586, as Ireland's
foreign minister said a deal was expected on Thursday, with
fisheries agreed in principle but details still being discussed.
Sterling also strengthened against the euro, and was last up
0.3% at 89.90 pence. EURGBP=D3
Sources in London and Brussels said a deal was close as
British Prime Minister Boris Johnson held a late-night
conference call with his senior ministers and negotiators pored
over reams of legal trade texts. Johnson and EU Commission President Ursula von der Leyen are
expected to hold a news conference later on Thursday morning,
the BBC reported. "This time it really does appear that a deal will be struck
just in time for Christmas," Westpac macro strategist Tim
Riddell told clients.
He said a deal on Thursday could push the pound up to $1.40
- a level it has not breached since 2018 - but added: "Potential
for a more substantial move towards 1.4500 now seems unlikely
given how positions exhaustion is so prevalent."
The Brexit headlines overshadowed U.S. President Donald
Trump's demand for changes to a coronavirus aid bill,
effectively threatening a government shutdown next week.
The safe-haven dollar slid further against a basket of
currencies on Thursday, down 0.3% to 90.188 =USD following
Wednesday's 0.3% slide. The euro strengthened 0.2% to $1.22055
EUR=EBS
Risk appetite supported other trade-sensitive currencies,
with the Australian dollar up as much as 0.3% against the dollar
at 76.03 U.S. cents AUD= following the previous session's 0.8%
jump.
The greenback also slipped 0.2% to 6.5185 Chinese yuan in
the offshore market CNH=EBS .
"Republicans and Democrats agreeing on the deal is positive
news, and now the delay gives you an upside option of getting
more – the (stimulus) bill is unlikely to get worse," said Lauri
Halikka, fixed income and FX strategist at SEB in Stockholm.
"So the near-term uncertainty is probably compensated by a
chance of getting a larger bill. Further, Biden gets inaugurated
in less than a month's time, so the delay is unlikely to get any
longer than that in the worst case."
The dollar index has lost more than 6% this year as
investors bet the U.S. Federal Reserve would keep its monetary
policy ultra-accommodative and fiscal stimulus would speed an
economic recovery in 2021. Expectations for further declines in
the dollar are helping buoy stock markets and emerging-market
currencies. Even if the deal is not approved and the dollar benefits
from safe-haven buying in the shorter term, it will still weaken
to $1.23 per euro over the course of 2021, according to Jane
Foley, head of FX strategy at Rabobank.
The yen, another safe-haven currency, was down about 0.1% at
103.615 per dollar JPY=EBS .
Bank of Japan Governor Haruhiko Kuroda said on Thursday the
central bank was ready to take new steps to make its massive
monetary easing more effective and sustainable.