* Pound strengthens on reports of deal despite no official
* Brexit optimism overshadow Trump's threat to block
* Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E
By Kevin Buckland
TOKYO, Dec 24 (Reuters) - Sterling extended gains on
Thursday amid expectations a long-elusive Brexit deal was
imminent, raising hopes the UK can avoid a turbulent economic
rupture on New Year's Day.
The dollar was on the back foot in holiday-thinned trading
as hopes for an agreement that would protect some $1 trillion in
annual cross-channel trade from tariffs and quotas sapped demand
for the safest assets.
The British pound strengthened 0.2% to $1.3525 early
in the Asian day after surging 0.9% in the previous session to
snap a three-day losing streak.
The dollar index was at 90.255 following Wednesday's
0.3% slide. The euro strengthened 0.1% to $1.22025,
adding to a 0.2% gain overnight.
The riskier Aussie dollar traded at 75.802 U.S. cents
following the previous session's 0.8% jump.
While there has been no official confirmation from either
side that the months of negotiations had reached a conclusion, a
senior British government source said Prime Minister Boris
Johnson was poised to do a trade deal with the EU, after media
reports said the agreement had already been done.
A source at the EU's executive Commission said talks were
still under way, and another British government source was also
cautious, saying negotiations were ongoing.
"This time it really does appear that a deal will be struck
just in time for Christmas," Westpac macro strategist Tim
Riddell wrote in a client note dated Dec. 24.
"If a deal does transpire on 24th December, GBP is likely to
make further gains" toward $1.40, "but potential for a more
substantial move towards 1.4500 now seems unlikely given how
positions exhaustion is so prevalent."
The Brexit headlines overshadowed U.S. President Donald
Trump's demand for changes to a coronavirus aid bill,
effectively threatening a government shutdown next week.
The dollar index has lost more than 6% this year as
investors bet the U.S. Federal Reserve will keep its monetary
policy ultra-accommodative and fiscal stimulus will speed an
economic recovery in 2021. Expectations for further declines by
the dollar are helping buoy stock markets and emerging-market
"The fact that equity indices traded mostly in the green
this morning reflects a consensus expectation that Trump will
sign the budget into law – though he could wait until the
eleventh hour," Jane Foley, senior FX strategist at Rabobank in
London, wrote Wednesday in a research note.
"If this doesn’t happen the USD could benefit from safe
haven buying," but longer term the U.S. currency will weaken to
$1.23 per euro over the course of next year, she said.
Currency bid prices at 9:47AM (047 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.2199 $1.2187 +0.11% +8.83% +1.2201 +1.2185
Dollar/Yen 103.5520 103.6200 +0.00% -4.60% +103.5870 +0.0000
Euro/Yen 126.34 126.19 +0.12% +3.60% +126.3600 +126.1900
Dollar/Swiss 0.8873 0.8885 -0.12% -8.29% +0.8882 +0.8874
Sterling/Dollar 1.3515 1.3500 +0.13% +1.92% +1.3522 +1.3495
Dollar/Canadian 1.2846 1.2846 +0.02% -1.09% +1.2849 +1.2842
Aussie/Dollar 0.7583 0.7579 +0.09% +8.11% +0.7591 +0.7571
NZ 0.7098 0.7096 +0.04% +5.50% +0.7102 +0.7092
Dollar/Dollar All spots
Tokyo Forex market info from BOJ
(Reporting by Kevin Buckland)