Dollar snaps six-day losing streak, a flat start for 2020

Thedollarsnapped a six-day losing streak to add 0.2 per centon Thursday, the first trading day of 2020, pushing the euroofffive-month highs while theoffshore yuan shruggedoff-reserve ratio cuts that could add $115 billion worth of liquidity.

Trading may remain thin until Tuesday when most European countries open after Monday's Epiphany holiday but market players will be relieved thedollarnavigated the thin-liquidity holiday period without experiencing the money market squeezes many had feared.

But wariness remains that there could be a repeat of last January's "flash crash" when massive stop-loss selling swept through holiday-thinned markets. Japanese retail investors are seen to have gone into the Tokyo holiday heavily short yen and long high-yielding currencies, including the Turkish lira.

Add WION as a Preferred Source

Such yen moves tend to fuel wild swings in thedollaras well but traders may be better prepared than last year.

"There had been some talk of a possibledollarsqueeze but USrates have been calm as the Fed has been on top of the game and providing enough liquidity. So nowdollar-yen is mostly moving in line with the general risk sentiment," said Lauri Halikka, fixed income and FX strategist at SEB in Stockholm.

USPresident Donald Trump said on Tuesday that Phase Oneof trade deal with China would be signed on January15 at the White House, but uncertainty surrounds details of the agreement.

Having ended December almost 2 per centlower against a basket of currencies, thedollarinched up to 96.55 while against the euro it was flat around $1.12095, justoffits early-August peak of $1.1249. It ended 2019 almost flat.

The yuan closed at 6.9631 to thedollar, its strongest close since August 2, and itsoffshore version also firmed after an initial downward move after China's Wednesday move to cut the amount of cash that banks must hold, releasing $115 billion worth of funds to support the economy.

But the move had been widely expected ahead of January's Lunar New Year holidays and after Premier Li Keqiang's pledge last month to unleash more stimulus.

In terms of data, final purchasing managers indexes painted a slightly brighter than expected picture across much of Asia and Europe, with final French, German and euro zone readings a touch better than advance PMIs. However, they confirmed euro zone activity contracting for the 11th straight month.

The euro strengthened 1.8 per centto thedollarlast month but the PMIs failed to lift it further even though bond yields extended their rise and inflation expectations rose to the highest since July.

But Societe Generale analysts wrote; "Higher bond yields are likely to keep the euro's micro-rally going, wildfires will keep a lid on Aussiedollar, and PMIs and oil are supporting Norwegian, Swedish and Canadian currencies."

The Swedish crown firmed 0.3 per centagainst the euro after PMIs rose in December after three months of declines though they still languished in contraction territory.

Norway's PMI index rose to 55.5 points from November's revised 53.8 points, allowing the Norwegian crown to scale new 3-1/2-month highs to the euro.

The Australiandollarslipped 0.2 per centwhile the Canadiandollarwas close to 2-1/2-month highs.

The British pound slipped 0.2 per centhowever after December's 2.5 per centgain.