FOREX-Pound holds gains as Brexit Party pledge eases hung parliament fears

* Brexit Party stands down in Conservative seats
* Rising HK tensions, U.S.-China tariff rollback uncertainty
eyed
* Markets await Trump's "trade and economic policy" speech
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tomo Uetake
TOKYO, Nov 12 (Reuters) - Sterling held gains in early Asian
trade on Tuesday, having hit a six-month high versus the euro
and rising as much as 1% against the dollar overnight, as the
prospect of a hung parliament in UK elections eased slightly.
In a significant boost for Prime Minister Boris Johnson
ahead of the Dec. 12 election, Brexit Party leader Nigel Farage
said his party was standing down candidates in seats won by the
Conservatives in 2017 and would instead focus on challenging
anti-Brexit politicians. The pound rallied to as high as $1.2896 on the news, which
the market had interpreted as reducing the probability of a
hung- or Labour led- government. The currency later eased to
$1.2858 GBP=D4 .
Against the euro, the sterling strengthened to its highest
level since May 8, at 85.62 pence EURGBP=D4 .
Lee Hardman, a strategist at MUFG said the Brexit Party
standing down candidates could clear the way for the
Conservatives to pass their Brexit withdrawal deal.
The pound had already risen above $1.28 before Farage's
announcement, after data showed the UK economy had narrowly
missed a recession in the third quarter of 2019, expanding 0.3%.
"The sterling's move was notable because other currencies
were quiet, mainly because the U.S. market was closed," said
Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
"Although it certainly is positive the Conservatives got
greater support, I'm not all that optimistic because I think
anything can happen in the coming month."
Also weighing on the dollar were doubts about Beijing's and
Washington's potential agreement to roll back tariffs and
concerns over rising Hong Kong tensions, although trading
volumes were lower than usual with U.S. markets partially closed
on Monday for Veterans Day.
"The dollar's recent rally on the back of rising Treasury
yields paused yesterday as the U.S. cash bond market was
closed," said Mitsuo Imaizumi, chief currency strategist at
Daiwa Securities.
The euro last changed hands at $1.1034 EUR= , while the
greenback last traded at 109.12 yen JPY= , both little changed
on the day.
In Hong Kong, riot police fired tear gas at a university
campus on early Tuesday, a day after a protester was shot and a
man set on fire in some of the most dramatic unrest to rock the
Chinese-ruled city in more than five months. Also, caution ruled ahead of a speech by President Trump to
the Economic Club of New York later in the day in case there was
any new word on the Sino-U.S. "phase one" trade
deal.