* 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
SYDNEY, Dec 20 (Reuters) - Sterling 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 sat at $1.3008 early in Asian trading
hours as worries grow about whether a deal can be sorted out
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 2.4%
against the dollar since Monday. It has fared even worse against
the euro, headed for its largest weekly loss in more than three
years if the slide persists 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 per euro EURCHF=R and its strongest against the dollar
since September 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 was steady at 97.404.
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 109.37 yen and a tiny bit weaker against the euro
EUR= at $1.1124. 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 dentente.