FOREX-Risk-on move dents dollar; yuan set for best day since Dec

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Yuan at highest levels since March 18 vs. USD

(New throughout; changes dateline; previous LONDON)
By Kate Duguid
NEW YORK, July 6 (Reuters) - The yuan on Monday was on track
for its best day against the dollar since December as investors
lapped up risky assets on growing expectations of a strong
Chinese economic rebound and as glimmers of good news in U.S.
data drove down demand for the safe-haven dollar.
An index of blue-chip Chinese shares .CSI300 soared to its
highest in five years as traders bet on a revival in China,
pushing the offshore yuan CNH= up 0.75% to its highest level
since March 18 and on track for its best daily performance since
Dec. 12. It was last at 7.015 yuan per dollar.
"The rally in mainland China equities has been the big
catalyst," said Stephen Gallo, European head of FX strategy at
BMO Financial Group.
"The only caveat is that China's economy not driven purely
by free-market forces. But if regulators in China are
engineering a stronger equity market, it can still feed through
to the rest of the world."
A broad-based risk-on move also weakened the U.S. dollar.
Against a basket of six rival currencies =USD , it was last
down 0.42% at 96.76, having earlier hit its lowest since June
24.
Monday's move followed a significant technical event on
Friday called a death cross - in which the dollar index's 50-day
moving average crossed below its 200-day moving average -
indicating the potential for a sell-off.
"It signals that you're seeing positive sentiment taking
hold... on the back of a more positive view of the global
economy," said Charles Tomes, portfolio manager at Manulife
Investment Management.
Contributing to the morning's risk-on move was a report that
U.S. services industry activity rebounded sharply in June,
almost returning to its pre-COVID-19 pandemic levels. A
resurgence in coronavirus cases, however, has forced some
restaurants and bars to close again, threatening the emerging
recovery. The euro rose to a two-week high of $1.1345, supported by
the positive sentiment about a revival in Chinese economic
activity as well as strong data. German industrial goods
production rose by 10.4% in May, rebounding from their biggest
drop since records began in 1991 and the bloc's retail sales
figures rose above pre-coronavirus levels in some countries.