* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* London, Brussels agree to go "extra mile"
* Analysts warn that pound's gains may not last
* U.S. policymakers seen increasing bond purchases this week
By Stanley White and Kevin Buckland
TOKYO, Dec 14 (Reuters) - The British pound rose against the
dollar and euro on hopes that Britain and the European Union
will secure a free trade agreement after their decision to
extend negotiations beyond the Sunday deadline.
The dollar traded near a 2 1/2-year low against major peers
ahead of a U.S. Federal Reserve meeting ending Wednesday where
policymakers are expected to increase purchases of longer-dated
Treasuries to contain a rise in yields.
The rally in sterling may not last, some analysts warn,
because Britain and the EU have repeatedly struggled to narrow
their differences and there is still a risk that trade and
business will be thrown into chaos without an agreement.
"This is a temporary move higher in the pound, but it is
still not clear that a no-deal scenario can be avoided," said
Junichi Ishikawa, senior foreign exchange strategist at IG
Securities in Tokyo.
"A partial deal with an agreement to negotiate further next
year might save the pound, but anything less would lead to
renewed selling. I would not buy sterling from here."
The British pound GBP=D3 jumped by 0.72% to $1.3311, its
biggest one-day gain since Dec. 1.
Against the euro, sterling EURGBP=D3 rose by 0.53% to
91.10 pence.
The euro EUR=D3 edged up 0.21% to $1.2133.
The dollar was little changed at 104.04 yen JPY=D3 .
London and Brussels agreed on Sunday to "go the extra mile"
in coming days to try to reach a trade agreement despite missing
their latest deadline to avert a turbulent exit for Britain from
the European Union at the end of the month. Britain formally left the EU in January, but has since been
in a transition period during which it remains in the EU single
market and customs union, meaning that rules on trade, travel
and business have stayed the same.
That all ends on Dec. 31, and if by then there is no
agreement to protect around $1 trillion in annual trade from
tariffs and quotas, businesses on both sides would be hit hard,
but the British pound is more vulnerable to selling than the
euro, analysts warn.
The dollar, which has also been under selling pressure
recently, faces a big week because of the Fed's policy meeting.
U.S. dollar net short positioning in the latest week climbed
to its highest since late September, according to calculations
by Reuters and Commodity Futures Trading Commission data
released on Friday. The dollar index =USD against a basket of six major
currencies stood at 90.775, close to a 2 1/2-year low.
Investors have sold the dollar on expectations of a global
recovery, buoyed by positive coronavirus vaccine news and hopes
for further U.S. stimulus that should lift the market's risk
appetite.
The first shipments of coronavirus vaccines have begun
spreading across the United States. In addition, there is hope
for more fiscal stimulus after Reuters reported the $908 billion
relief plan will be split in two in an effort to win approval
and could be introduced as early as Monday. The dollar is also under pressure due to expectations that
U.S. interest rates will remain low for an extended period.
"The secular trend remains overwhelmingly of U.S. dollar
weakness," Tapas Strickland, a director of economics at National
Australia Bank in Sydney, wrote in a research note.
Elsewhere, the onshore yuan CNY=CFXS edged up to 6.5384 as
traders shrugged off steps taken by the People's Bank of China
to slow capital inflows and ease upward pressure on its
currency.
The Australian dollar AUD=D3 was little changed at
$0.7540. Central bank minutes on Tuesday could prompt investors
to scale back bets for additional monetary easing.
Across the Tasman Sea, the New Zealand dollar NZD=D3 held
steady ahead of data later in the week forecast to show a sharp
rebound in the country's gross domestic product.
========================================================
Currency bid prices at 2:35PM (0535 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.2133 $1.2108 +0.21% +8.23% +1.2143 +1.2110
Dollar/Yen JPY=D3 104.0400 104.0150 +0.03% -4.20% +104.0550 +103.8950
Euro/Yen EURJPY= 126.22 125.96 +0.21% +3.50% +126.3400 +125.9900
Dollar/Swiss CHF=EBS 0.8891 0.8898 -0.07% -8.11% +0.8895 +0.8885
Sterling/Dollar GBP=D3 1.3311 1.3222 +0.72% +0.41% +1.3379 +1.3270
Dollar/Canadian CAD=D3 1.2756 1.2766 -0.06% -1.79% +1.2763 +1.2746
Aussie/Dollar AUD=D3 0.7540 0.7535 +0.07% +7.46% +0.7559 +0.7524
NZ NZD=D3 0.7085 0.7085 +0.03% +5.32% +0.7102 +0.7080
Dollar/Dollar
All spots FX=
Tokyo spots AFX=
Europe spots EFX=
Volatilities FXVOL=
Tokyo Forex market info from BOJ TKYFX