Sterling gains amid hopes of imminent Brexit deal

Tokyo

STERLING extended gains on Thursday amid expectations a long-elusive Brexit deal was imminent, raising hopes the United Kingdom can avoid a turbulent economic rupture on New Year's Day.

The US dollar was on the back foot in holiday-thinned trading as hopes for an agreement that would protect some US$1 trillion in annual cross-channel trade from tariffs and quotas sapped demand for the safest assets.

The British pound strengthened 0.4 per cent to US$1.3546 in Asian hours, after surging 0.9 per cent in the previous session to snap a three-day losing streak.

The dollar index was at 90.233 following Wednesday's 0.3 per cent slide. The euro strengthened 0.1 per cent to US$1.22030, adding to a 0.2 per cent gain overnight.

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 UK Prime Minister Boris Johnson was poised to do a trade deal with the European Union (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 Dec 24, GBP is likely to make further gains" toward US$1.40, "but potential for a more substantial move towards 1.4500 now seems unlikely given how positions exhaustion is so prevalent".

The yen was little changed at 103.56 per US dollar. Bank of Japan governor Haruhiko Kuroda said on Thursday the central bank is ready to take new steps to make its massive monetary easing more effective and sustainable.

The riskier Aussie dollar traded at 75.797 US cents following the previous session's 0.8 per cent jump.

The greenback slipped 0.1 per cent to 6.5204 Chinese yuan in the offshore market. The onshore yuan changed hands at 6.5325 per US dollar.

The dollar index has lost more than 6 per cent this year as investors bet the US 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 US dollar are helping buoy stock markets and emerging-market currencies. REUTERS