* Euro jumps briefly against dollar, yen at start of Asian
* Still up 0.4 pct vs dollar, 1 pct vs yen after dust
* Moves prompt comparisons with sterling flash crash in Oct
* Dollar index still up almost 4 pct for the year
* China's basket move puts weakening yuan in spotlight
By Patrick Graham
LONDON, Dec 30 A short-lived spike in the euro
dominated this year's last day of trade in major foreign
exchange markets on Friday, with dealers citing a handful of
orders as driving the dollar to its lowest since Dec. 8.
The euro surged to as high as $1.07 on the move, two full
cents higher, before retreating to $1.0543, still up 0.4 percent
on the day.
The yo-yo nature of that trade prompted analysts to draw
parallels with the "flash crash" in October which briefly
knocked almost 10 percent off the value of Britain's pound.
As then, the shift came in the period at the start of the
Asian day when markets are at their thinnest and the majority of
liquidity available tends to come from the automated computer
programmes run by banks and other major houses.
"It looks like it was a combination of thin markets, some
year-end rebalancing against the dollar and covering of shorts
above $1.05," said Alvin Tan, a strategist with Societe Generale
"The fact that banks have reduced the provision of liquidity
given regulatory restrictions contributes to this kind of move
and makes it slightly more structural. These kinds of crashes
are going to be with us for some time."
Further gains for the greenback are one of the big consensus
plays for financial investors going into 2017, although there
have been signs of doubt in recent weeks, with analysts
beginning to wonder how much further appreciation a Donald Trump
White House will tolerate.
Still, despite all the gains for the dollar since Trump's
victory in November, the single currency is down just 3 percent
for the year against the dollar and a number of major banks
predict a test of parity early next year.
The dollar index, which tracks the greenback against a
basket of six major rivals, slipped 0.3 percent to 102.40
, down from a 14-year high of 103.65 hit on Dec. 20 and up
3.8 percent on the year.
Similarly, although the yen has fallen 15 percent against
the dollar in the past three months on expectations Trump will
boost U.S. public spending and inflation, it is still up almost
3 percent for the year.
The euro gained 0.6 percent to 122.99 yen after
reaching its highest since Dec. 15, but remained on track to
shed 5.8 percent against the yen 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.
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.
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.
(Additional reporting by Tokyo markets team)