* Euro jumps against dollar, yen, but on track for yearly
* Dollar index edges down, but still solidly up for the year
* Sterling on track for hefty loss for year marked by Brexit
* China's basket move puts weakening yuan in spotlight
TOKYO, Dec 30 The euro jumped to its highest in
three weeks in thin Asian trade on Friday, but was on track for
a losing year on expectations that U.S. President-elect Donald
Trump's policies will boost inflation and prompt the U.S.
Federal Reserve to hike interest rates more frequently.
On the last trading day of 2016, the dollar index, which
tracks the greenback against a basket of six major rivals,
slipped 0.3 percent to 102.40, below its high of the year
of 103.65 touched on Dec. 20, which was its highest level since
January 2003. But it was still poised to gain 3.8 percent for
The euro was last up 0.4 percent at $1.0527 after
briefly spiking to $1.0700, its highest since Dec. 8. It was
down 3 percent against the dollar for the year.
The euro also soared against the Japanese currency. It was
up 0.6 percent at 122.99 yen after touching 123.87,
its highest since Dec. 15, but remained on track to shed 5.8
percent for the year.
"It's a really thin market today, and suddenly offers
disappeared and short-term players pushed the euro higher and
took out stops. That's all," said Kaneo Ogino, director at
foreign exchange research firm Global-info Co in Tokyo.
The dollar clawed back lost ground against the yen to stand
at 116.77 yen after earlier touching 116.05, its lowest
since Dec. 14. The dollar was down 2.9 percent for the year
against the yen, but considerably pared its losses after the
Nov. 8 U.S. presidential election.
Trump's victory helped push U.S. Treasury yields to
multi-year highs on expectations that his administration would
embark on inflation-stoking stimulus policies, and the U.S.
central bank would respond with more interest rate increases.
On Thursday, though, a strong U.S. 7-year note auction on
the last full trading day of the year pushed down yields across
the curve, undermining the dollar's appeal.
The U.S. bond market will close at 2 p.m. Friday in advance
of the New Year's holiday weekend. Japanese markets will be
closed Monday and Tuesday.
Sterling rose 0.1 percent to $1.2278, moving away
from a two-month low of $1.2201 plumbed Wednesday. It was down
16.6 percent in a year marked by Britain's June vote to exit the
China's yuan looked set to end the year down
around 7 percent against the resurgent dollar, making it the
worst performing Asian currency of the year.
China will change the way it calculates a key yuan index in
the new year, nearly doubling the number of foreign currencies
in a basket that is used to set the yuan's value, its foreign
exchange market operator said late on Thursday.
China has been promoting use of the index partly to divert
attention from the yuan's value against the dollar which has
fallen near its lowest in 8-1/2 years.
By adding another 11 currencies, China will reduce the
dollar's weighting in the basket to 22.4 percent from 26.4
percent, according to currency strategists at Brown Brothers
"Although the yuan is at an eight-year low against the
dollar, it is near a four-month high against the current CFETS
basket," they said.
Analysts said the change was in line with the central bank's
intention to discourage investors from exclusively tracking the
yuan's fluctuations against the dollar, but it would have
limited impact on the Chinese currency, which is expected to
weaken further against the dollar in 2017.
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(Reporting by Tokyo markets team; Editing by Kim Coghill and