FOREX-Sterling 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
weigh
* Markets await Trump's Economic Club speech for clues on
trade
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tomo Uetake
TOKYO, Nov 12 (Reuters) - Sterling held gains in 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 risk
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 that would further complicate
Britain's exit from the European Union.
Cable gave up some of its overnight gains and was last at
$1.2858 GBP=D4 .
Sterling 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%.
Against the euro, the sterling strengthened to its highest
level since May 8, at 85.62 pence EURGBP=D4 . The pair last
stood at 85.79 pence.
Currency analysts said the Brexit Party standing down
candidates could clear the way for the Conservatives to pass
their Brexit withdrawal deal.
"The sterling's move was notable while other currencies were
quiet, mainly because the U.S. market was closed," said Ayako
Sera, market strategist at Sumitomo Mitsui Trust Bank.
The U.S. financial markets were partially closed on Monday
for Veterans Day.
"It certainly is positive that the Conservatives got greater
support. But with a month to go ahead of the Dec. 12 election,
I'm not all that optimistic because I think anything can still
happen," Sera said.
The euro/dollar last changed hands at $1.1033 EUR= , flat
on the day, while the greenback was a shade higher at 109.15 yen
JPY= .
"The dollar's recent rally on the back of rising Treasury
yields paused yesterday as the U.S. cash bond market was closed
for Veterans Day," said Mitsuo Imaizumi, chief currency
strategist at Daiwa Securities.
Also weighing on the U.S. currency were doubts about whether
Beijing and Washington can reach a potential trade agreement and
roll back tariffs, and concerns over rising Hong Kong tensions.
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. 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. The Chinese yuan was little changed at 7.0040 per dollar in
offshore trade CNH=D4 , with traders awaiting developments on
trade as well as Hong Kong.
Elsewhere, the New Zealand dollar slipped as traders wagered
on a higher probability of a rate cut this week after a central
bank survey on Tuesday showed the country's near-term inflation
expectations eased in the fourth quarter. The New Zealand dollar NZD=D4 skidded as mus as 0.6% to
$0.6326 after the Reserve Bank of New Zealand's quarterly survey
of expectations. It last quoted at $0.6333.
As a reduction to the official cash rate by the RBNZ will
add pressure on its Australian counterpart to ease too, the
Aussie dollar AUD=D4 also dipped to as low as $0.6832.