FOREX-Dollar snaps 6-day losing streak, yuan shrugs off PBOC cash injection

* Dollar index firms slightly, offshore yuan flat
* PMIs across Asia, Europe lend hope of recovery
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Sujata Rao
Jan 2 (Reuters) - The dollar snapped a six-day losing streak
to add 0.2% on Thursday, the first trading day of 2020, pushing
the euro off five-month highs while the offshore yuan shrugged
off reserve ratio cuts that could add $115 billion worth of
liquidity.
Trading may remain thin until Tuesday, when most European
countries open after Monday's Epiphany holiday but market
players will be relieved the dollar navigated the thin-liquidity
holiday period without experiencing the money market squeezes
many had feared. But wariness remains that there could be a repeat of last
January's "flash crash" when massive stop-loss selling swept
through holiday-thinned markets. Japanese retail investors are
seen to have gone into the Tokyo holiday heavily short yen and
long high-yielding currencies, including the Turkish lira.
Such yen moves tend to fuel wild swings in the dollar as
well but traders may be better prepared than last year.
"There had been some talk of a possible dollar squeeze but
U.S. rates have been calm as the Fed has been on top of the game
and providing enough liquidity. So now dollar-yen is mostly
moving in line with the general risk sentiment," said Lauri
Halikka, fixed income and FX strategist at SEB in Stockholm.
U.S. President Donald Trump said on Tuesday that Phase 1 of
trade deal with China would be signed on Jan. 15 at the White
House, but uncertainty surrounds details of the agreement.
Having ended December almost 2% lower against a basket of
currencies, the dollar inched up to 96.55 .DXY while against
the euro it was flat around $1.12095, just off its early-August
peak of $1.1249 EUR=EBS . It ended 2019 almost flat.
The yuan closed at 6.9631 to the dollar CNY= , its
strongest close since Aug. 2, and its offshore version also
firmed after an initial downward move CNH=EBS after China's
Wednesday move to cut the amount of cash that banks must hold,
releasing $115 billion worth of funds to support the economy.
But the move had been widely expected ahead of January's
Lunar New Year holidays and after Premier Li Keqiang's pledge
last month to unleash more stimulus.
In terms of data, final purchasing managers indexes painted
a slightly brighter than expected picture across much of Asia
and Europe, with final French, German and euro zone readings a
touch better than advance PMIs. However, they confirmed euro
zone activity contracting for the 11th straight month
The euro strengthened 1.8% to the dollar last month but the
PMIs failed to lift it further even though bond yields extended
their rise and inflation expectations rose to the highest since
July EUIL5YF5Y .
But Societe Generale analysts wrote:
"Higher bond yields are likely to keep the euro's
micro-rally going, wildfires will keep a lid on Aussie dollar,
and PMIs and oil are supporting Norwegian, Swedish and Canadian
currencies."
The Swedish crown firmed 0.3% EURSEK=D3 against the euro
after PMIs rose in December after three months of declines
though they still languished in contraction territory.
Norway's PMI index rose to 55.5 points from November's
revised 53.8 points, allowing the Norwegian crown to scale new
3-1/2-month highs to the euro EURNOK=D3 .
The Australian dollar slipped 0.2% Canadian dollar was close to 2-1/2-month highs CAD=D3 .
The British pound slipped 0.2% GBP=D3 however after
December's 2.5% gain.