FOREX-Dollar off to a flat start for 2020 as others find the fizz

* Dollar flat on first trading day, no fireworks as yet
* Euro, yen near major resistance levels after Dec gains
* China Caixin PMI dips to 51.5, confidence surges
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Wayne Cole
SYDNEY, Jan 2 (Reuters) - The dollar started the new year
where it left the old one, on the back foot as investors wagered
U.S. economic outperformance might be drawing to a close as
optimism on trade brightens the outlook for growth globally.
Signs of progress in the Sino-U.S. trade dispute undermined
the dollar for much of December, leaving its index .DXY down
1.9% on the month. It was up just a fraction on Thursday at
96.546 having touched a six-month trough ahead of the holidays.
The euro held at $1.1215 EUR= , after gaining 1.8% in
December to reach its highest since early August. It now looks
set to challenge the August peak at $1.1249.
The dollar eased further on the Chinese yuan after shedding
1% last month to stand at 6.9630 CNH= . It was also finely
poised on the yen at 108.68 JPY= , just a whisker from the
December lows and major support around 108.40.
"A more encouraging global growth outlook and flush dollar
liquidity conditions are undermining the USD," said Elias
Haddad, a senior currency strategist at Commonwealth Bank of
Australia.
"Specifically, global fiscal/monetary policy settings will
remain accommodative in 2020 and China's growth slowdown is
stabilising."
China's central bank on Wednesday cut the amount of cash
that banks must hold as reserves, releasing around 800 billion
yuan ($114.91 billion) to shore up the economy. A survey of Chinese manufacturing out on Thursday showed
activity was still expanding in December while confidence shot
higher as trade tensions eased. The dollar had benefited from U.S. economic outperformance
for much of 2019, but an easing in Sino-U.S. trade concerns has
boosted optimism that this year could favour other major
nations.
While activity was light on Thursday, traders were on watch
for any repeat of last January's "flash crash" when massive
stop-loss selling swept through an illiquid holiday-hit market.
There are fears the same could happen this week with Tokyo
off and Japanese retail investors again heavily short of yen and
long of risky high-yielding currencies, including the Turkish
lira and the South African rand.
For liquidity reasons, these positions are usually "legged"
through the U.S. dollar - selling yen for dollars and dollars
for lira - so any mass unwinding roils more than just the yen
crosses.
Yet, unlike last year, the authorities are on alert with the
Financial Futures Association of Japan warning against wild
moves.
The Federal Reserve has already averted a squeeze in lending
markets as banks took only a small portion of its d $150 billion
in year-end funding, leaving repo rates at the lowest since
March 2018.