FOREX-Dollar gains as U.S. economic strength supports sentiment

* Dollar, yuan boosted by economic prospects
* Traders prepare for BoJ, ECB meetings
* Sterling on the ropes again after Javid comments
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

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LONDON, Jan 20 (Reuters) - The dollar rose to its strongest
level of 2020 on Monday after last week's run of data confirmed
that the U.S. economy is holding up well, while China's yuan
briefly hit a new six-month high.
Mostly, however, it was another quiet start to the week for
currencies, with FX volatility near all-time lows and little in
the way of key economic data.
Investors are focused on central bank meetings in Japan, on
Tuesday, and the European Central Bank meeting on Thursday.
Trading volumes were thin as Lunar New Year approaches in
Asia and with U.S markets closed for Martin Luther King day on
Monday.
Figures on Friday showed U.S. homebuilding surged to a
13-year high in December. Retail sales also rose and a gauge of
manufacturing activity rebounded to its highest in eight months.

The strength in the U.S. economy underlines its relative
outperformance versus the euro zone, although recent data point
to a bottoming out in the European economy, as well as a
recovery in China.
"Data released since the previous ECB meeting have been
positive and consistent with the slightly more optimistic tone
struck by (ECB President Christine) Lagarde in December
regarding the economic outlook," RBC Capital Markets' currency
strategist Adam Cole said.
The euro has failed to benefit much from the more positive
noises, however, and the euro/dollar exchange rate is firmly
stuck within a tight trading range.
The dollar edged up 0.1% against a basket of currencies,
with the index rising to as high as 97.727, its strongest since
Dec. 24. The euro was down marginally at $1.1085 EUR=EBS .
China's offshore yuan increased to as high as 6.8458
CNH=EBS , a new six-month high, before the rally fizzled. It
traded at 6.8715, down slightly, by 1145 GMT.
China on Friday posted its slowest annual growth figure in
almost 30 years, although December data showed revived business
confidence and quickening factory output. Sterling dropped on Monday to as low as $1.2962 GBP=D3 ,
down 0.3%, after weekend comments by finance minister Sajid
Javid that Britain would not commit to sticking to European
Union rules in post-Brexit trade talks. Sterling also declined versus the euro to 85.315 pence
EURGBP=D3 , down 0.1% on the session.
The pound is now at the mercy of employment data on Tuesday
and business surveys at the end of the week. Money markets price
in a near 70% chance of a Bank of England rate cut later this
month in the face of a struggling economy.
Japan's yen was unchanged against the dollar at 110.15 yen
JPY=EBS ahead of the BoJ meeting on Tuesday.
"Reduced pressure on the BoJ to ease monetary policy further
should help to ease downside risks for the yen although it has
clearly not been sufficient in the current 'risk-on' environment
to reverse the yen's weakening trend," MUFG analysts wrote.
The BoJ is expected to keep policy steady and nudge up its
growth forecasts as improved macroeconomic indicators take some
pressure off the central bank for more stimulus.