* Dollar has slumped this year on pandemic recovery hopes
* EU negotiator says deep rifts remain over fishing rights
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Kevin Buckland
TOKYO, Dec 23 (Reuters) - The dollar held gains against
major peers in holiday-thinned trading on Wednesday as caution
about a fast-spreading coronavirus variant in the UK stoked
demand for the safest assets.
The pound has fallen for three straight days as time runs
out for London to reach a trade deal with Brussels before the UK
completes its exit from the European Union at year-end.
The dollar index =USD rose 0.1% to 90.561, extending its
gain for the week to 0.7%. That still leaves it on track for a
more than 6% decline this year.
Sterling rose 0.1% to $1.3384 GBP=D4 , seeking to end a
three-day slide.
"People have some concerns about COVID and about Brexit, but
it's not at the point where the positive sentiment has turned,"
said Shinichiro Kadota, senior currency strategist at Barclays
Capital in Tokyo.
"Given how much the dollar has weakened, it's feasible to
see a retracement higher as people go for the holidays, but in
the very near term we expect the dollar to remain weak."
The market has been positioned for a pandemic recovery that
lifts global growth, sapping demand for the dollar and other
haven currencies.
U.S. Congress passed an $892 billion COVID-19 aid package
overnight, and vaccine rollouts are gaining
momentum. That development has since been clouded by President Donald
Trump's threat not to approve the stimulus bill, saying it
should be amended to increase the amount in the stimulus checks,
though this has had little impact on markets so far. "I don't know how much of this is posturing by Trump or if
he's really demanding these changes," said Barclays' Kadota.
"The muted reaction so far suggest the foreign-exchange
market expects the bill to pass in some form."
At the same time, the new coronavirus variant has introduced
new risks to that rosy scenario, even as medical experts have
sought to allay people's fears. The euro held Tuesday's 0.7% decline to trade at $1.2166
EUR=EBS .
The dollar was little changed at 103.63 yen JPY=EBS ,
another traditional haven.
With only days left before the UK leaves the EU's trade
orbit, the pound has vacillated as it awaits signs of progress
in negotiations.
A deal is possible Wednesday, an ITV reporter tweeted.
Earlier, the EU's chief negotiator said the bloc is making a
"final push" for a trade deal, although there are still deep
rifts over fishing rights. "The market is just waiting for the final result of Brexit
talks, and in the meantime being swung by conflicting
headlines," Barclays' Kadota said.
"Sterling will remain volatile."
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Currency bid prices at 10:07AM (107 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.2166 $1.2162 +0.03% +8.52% +1.2187 +1.2155
Dollar/Yen JPY=D3 103.5720 103.6100 +0.01% -4.60% +103.6220 +103.5400
Euro/Yen EURJPY= 126.00 126.04 -0.03% +3.32% +126.1700 +125.9500
Dollar/Swiss CHF=EBS 0.8892 0.8893 +0.02% -8.09% +0.8896 +0.8883
Sterling/Dollar GBP=D3 1.3378 1.3377 -0.04% +0.82% +1.3398 +1.3361
Dollar/Canadian CAD=D3 1.2904 1.2908 -0.01% -0.65% +1.2913 +1.2892
Aussie/Dollar AUD=D3 0.7530 0.7520 +0.15% +7.34% +0.7553 +0.7519
NZ NZD=D3 0.7035 0.7043 -0.14% +4.52% +0.7054 +0.7031
Dollar/Dollar
All spots FX=
Tokyo spots AFX=
Europe spots EFX=
Volatilities FXVOL=
Tokyo Forex market info from BOJ TKYFX