FOREX-Muted reaction in currencies to US-China trade deal; dollar index falls

* Euro/dollar matches 1-week high
* Chinese yuan flat vs dollar, but comfortable below 7
* Sterling rises to 6-day high vs dollar
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga
LONDON, Jan 16 (Reuters) - Major currencies mostly shrugged
off on Thursday the signing of the Phase-1 trade deal between
the United States and China, as most of the issues agreed upon
had been expected by investors since the summer.
Euro/dollar, the most fluid currency pair, was last trading
up 0.1% at $1.1164 EUR=EBS , matching the one-week high it
reached the day before.
An index which tracks the dollar against six other major
currencies fell to an eight-day low of 97.14 .DXY .
Beijing and Washington touted the Phase 1 deal, signed late
on Wednesday at the White House, as a step forward in resolving
their bitter trade dispute. U.S. Vice President Mike Pence fed optimism about further
progress, saying further Phase 2 discussions had already begun.
Yet market exuberance was checked because much of this was
priced in already and because it addresses few of the issues
that led to the trade conflict in the first place.
"Yesterday's signing of the phase one trade deal provided
confirmation of the progress made in trade talks since last
summer. The details of the deal were broadly in line with
expectations which have dampened the market impact overnight,"
said Lee Hardman, currency strategist at MUFG.
But other than the fact that it met expectations, analysts
said the agreement does not fully eliminate tariffs and is vague
on enforcement, and makes no real progress on host of thorny
problems. Some were also sceptical that purchase targets set out
in the deal are realistic.
"The deal relies heavily on China's goodwill and includes
forced purchases of U.S. goods and protection for Intellectual
Property rights and forced technology transfers," said Sebastien
Galy, strategist at Nordea Asset Management.
The centrepiece of the trade deal is a pledge by China to
purchase at least an additional $200 billion worth of U.S. farm
products and other goods and services over two years. The United
States will also cut by half the tariff rate it imposed on Sept.
1 on a $120 billion list of Chinese goods, to 7.5%.
"Some demands are extremely hard to swallow, such as
changing laws to accommodate the U.S. Overall, it feels like
something that will not last more than a few months," Galy said.
The Chinese yuan, the currency most sensitive to the
two-year U.S.-China trade dispute, was also 0.1% higher at
6.8852 per dollar in the offshore market CNH=EBS , not far from
the six-month high of 6.8662 it jumped to on Tuesday.
The level 7 in dollar/yuan has been a barometer for
U.S.-China tensions, so the fact that the Chinese remnibi has
remained below this level shows that investors remain more or
less optimistic about the trade relationship between the world's
two biggest economies and its impact on global growth.
The safe-haven Japanese yen JPY=EBS was 0.1% softer at
110.03 per dollar, while the Australian dollar held 0.1% firmer
at $0.6916. Both of these currencies were also a gauge of
stress.
The British pound rose to a six-day high of $1.3065
GBP=D3 . Against the euro, it was trading at 85.45 pence, 0.1%
higher EURGBP=D3 .