January 3, 2020 / 1:43 AM / 15 days ago

FOREX-Dollar gets reprieve ahead of key U.S. factory survey

* Dollar index edges away from 6-mth lows, but eases on yen

* Eyes on U.S. factory survey after poor UK, EU results

* Asia markets orderly on anniversary of ‘flash crash’

By Wayne Cole

SYDNEY, Jan 3 (Reuters) - The dollar shook off recent weakness on Friday as dismal economic news from Europe and the UK weighed on major rivals, while figures due later in the session are expected to point to some improvement in U.S. manufacturing.

Against a basket of currencies, the dollar snapped a six-session losing streak overnight to stand at 96.747, up slightly from the recent six-month low around 96.355.

It got a lift when surveys showed British factory output fell in December at the fastest rate since 2012, while the German manufacturing sector stayed deep in contraction.

That took the shine off the pound, which eased to $1.3154 , from a $1.3266 top on Thursday. The euro slipped to $1.1173, from a peak of $1.1225, backing away from major chart resistance around $1.1249.

“It might be a bit too early to put a tombstone over the dollar just yet, especially against the EUR and GBP,” said Stephen Innes, chief Asia market strategist at AxiTrader.

Of key importance will be if the Chinese yuan continued its recent rally against the dollar, he added.

“Every interbank trader I know is looking for the dollar to weaken into the election year, and with most views now pivoting to a stronger yuan, short dollars is probably a good position to be.”

The dollar was flat at 6.9593 yuan in offshore trading having trended lower for much of the past four weeks.

It was also restrained against the Japanese yen at 108.41 , testing the December lows and major support under 108.40.

An index of U.S. manufacturing activity due later is expected to show a slight uptick to 49.0 in December, from 48.1 the month before.

Figures out Thursday showed jobless claims edged lower last week in a positive signal for the U.S. labour market.

The resilience of employment is a major reason the Federal Reserve has signalled no more rate cuts will be needed in this cycle, leading markets to sharply scale back expectations of further policy easing.

Several Fed official are speaking on Friday including Governor Lael Brainard and the heads of the San Francisco, Chicago, Richmond and Dallas banks.

Analysts expect they will remain upbeat on the economic outlook and reiterate a steady outlook for rates.

The dollar had benefited from U.S. economic outperformance for much of 2019, though the recent easing in Sino-U.S. trade concerns has boosted optimism that this year could favour other major nations.

So far on Friday, there had been no repeat of the “flash crash” of Jan. 3 last year when massive stop-loss selling swept through an illiquid holiday-hit market.

Regulators have been on alert for any signs of strain and trade was thin but orderly. (Reporting by Wayne Cole; Editing by Sam Holmes)

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