FOREX-Dollar dips, set for smallest annual gain in 6 years

By Swati Pandey
SYDNEY, Dec 30 (Reuters) - The dollar was on the defensive
on Monday in light year-end trading after suffering a setback in
the previous session, as safe-haven demand for the greenback
waned on hopes of a U.S.-China trade deal and renewed optimism
about global growth.
Sentiment was also boosted during Asian hours after China's
central bank unveiled a measure that would help lower borrowing
costs and boost flagging economic growth. Investors also cheered
a report forecasting China's 2019 retail sales grew by 8%.
As the dollar fell out of favour, its index .DXY against
six major currencies eased a shade to 96.810 following Friday's
0.6% which was its biggest single day percentage drop since
June.
With Friday's loss, the index's gains for the year have
shrunk to 0.7%, putting it on track for the smallest annual
change in six years.
Against the Japanese yen, the dollar was a tad weaker at
109.13, on track to end the year slightly below where it started
in January. JPY=
The big gainers in recent weeks have been the risk-sensitive
and commodity-linked currencies of Australia and New Zealand.
AUD=D3 NZD=D3
The Aussie and the kiwi scaled five month peaks on Monday to
$0.6990 and $0.6719 respectively, boosted by higher commodity
prices and expectations the United States and China would sign a
trade deal soon.
Last week, Chinese authorities said Beijing was in close
contact with Washington about an initial trade agreement. Prior
to those comments, U.S. President Donald Trump had talked up a
signing ceremony for the recently struck Phase 1 trade deal.
But despite recent rallies, the annual performances of the
antipodean currencies were still dreary, with the Aussie down 1%
so far this year and the kiwi off a shade.
"What's really noticeable is the narrow range of currencies
during the year," said Marshall Gittler, Cyprus-based chief
strategist at ACLS Global, pointing to "economic and monetary
policy convergence."
"I expect less of both in 2020, for two reasons," he said,
noting the expected end of the Sino-U.S. trade war which should
lead to broader economic recovery across the world.
The second reason, Gittler said, was that inflation seemed
to have bottomed.
"As (inflation) accelerates, countries are less likely to
cut rates and maybe, possibly, conceivably some countries could
start thinking about hiking rates, which would encourage
monetary policy divergence."
Elsewhere, the euro EUR= rose for a sixth straight session
on Monday to $1.1198.
Bleak European economic data had prompted hedge funds to bet
on a weaker euro during 2019, but some strength in recent
Eurozone data along with weakness in other currencies have
lifted the euro.
The common currency has jumped 2.7% in this quarter but that
was still not enough to wipe out this year's losses.
Sterling GBP= was higher after European Commission
President Ursula von der Leyen said the European Union may need
to extend the deadline for talks about a new trade relationship
with Britain.
Even with the recent UK general election smoothing the path
for Britain's exit from the European Union, Britain's ability to
strike a new trading deal with the EU in a relatively short span
of time remains a concern for some investors.
The pound was last up 0.26% for its fifth straight session
of gains at $1.3110.
Later in the day, investors will stay tuned for the Chicago
Purchasing Management Index, also known as the Chicago Business
Barometer for clues about the health of the U.S. economy.