FOREX-Pound soars as election clears Brexit fog, yuan up on trade deal

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Result of British general election may ease concern about
Brexit
* U.S.-China trade deal boosts yuan
* Safe-haven yen weakens on trade news
* Traders brace for wild ride in financial markets

By Stanley White
TOKYO, Dec 13 (Reuters) - The pound hit multi-year highs
against peers on Friday after a convincing Conservative Party
win in the UK election, which is expected to clear the Brexit
political gridlock that has hounded Britain's markets for years.
The lifting of one major cloud hanging over currency markets
came amid signs another might be clearing with reports of a
possible breakthrough in Sino-U.S. trade negotiations pushing
the Chinese yuan to a four-month top and nudging the Australian
and New Zealand dollars higher.
UK Prime Minister Boris Johnson's Conservatives have won
enough seats to give them an outright majority in parliament,
broadcaster ITV said, which would relieve almost four years of
uncertainty about when Brexit would take place. "We've already seen a strong reaction in the pound from the
exit poll," said Michael McCarthy, chief market strategist at
CMC Markets in Sydney.
"We also see a rise in stock futures in reaction to two very
important pieces of news for markets. This should support global
growth. The yuan can also go higher, but it depends on how much
dollar strength we get."
Against the euro, sterling EURGBP=D3 rose around 2% to as
high as 82.80 pence, the highest since July 2016, which is
shortly after the Brexit referendum that hammered the currency.
The pound GBP=D3 surged more than 2% to reach $1.3516, the
highest since May 2018, before settling at $1.3469.
That contrasts with the more than 10% plunge that
immediately followed Britain's vote to leave the European Union
in June 2016, which wiped $2 trillion off world markets.
ITV's report of an outright majority came after early
results and exit polls suggested that Johnson would get a
majority of 86 - the largest of any Conservative leader since
Margaret Thatcher won in the 1980s.
Such a commanding win would empower him to deliver Brexit on
Jan. 31.
However, even if Brexit is completed on Jan. 31, there is
still some uncertainty because Britain will then enter a
transition period during which it will negotiate a new
relationship with the remaining 27 EU states.
In Asian currencies, the yuan gapped higher and the Japanese
yen fell after a source told Reuters that the United States and
China have agreed some tariff reductions and a delay in U.S.
tariffs on Chinese goods set to go effect on Dec. 15.
A successful scaling back of trade tension would relieve one
major headwind to global economic growth, which suggests lower
demand for the safe-haven yen. Avoiding new tariffs should also
be a boost to China's slowing economy, which should draw more
investors to the yuan.
In the onshore market, the Chinese yuan CNY=CFXS surged to
6.9570, the strongest level since Aug. 2.
In the offshore market, the yuan CNH=D3 pulled back
slightly to 6.9672 per dollar, after surging more than 1% on
Thursday to the highest since Aug. 1 due to relief about a
resolution to trade friction.
The Australian dollar AUD=D3 rose 0.2% to $0.6925 after
briefly touching the highest since July. The New Zealand dollar
NZD=D3 also jumped to $0.6636 to reach the highest since July.
The yuan rallied and the yen fell sharply late on Thursday
after Bloomberg News reported that U.S. President Donald Trump
signed off on a trade deal with China that will delay a new
round of tariffs scheduled for Dec. 15. Talks between the world's two economic superpowers have been
fractious, so investors are focused on official confirmation of
the deal from both sides to be sure that an agreement is
actually in place.
The trade dispute between the United States and China over
Chinese trading practices has dragged on for almost two years,
and is one of the biggest risks to the global economy.
Against the dollar, the yen JPY=EBS fell 0.28% to 109.63,
the weakest since Dec. 2.
The euro EUR=EBS rose 0.35% to $1.1171, slightly below its
highest since Aug. 13.
The common currency got a boost against the greenback after
the European Central Bank's new president, Christine Lagarde,
made upbeat comments about the euro zone economy in her first
press conference on Thursday. The dollar index .DXY against a basket of six major
currencies fell 0.59% to 96.819, approaching the lowest since
July this year.

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