* Greenback sinks to lowest since mid-2018 against offshore yuan
* Sterling steadies above $1.33 as Brussels dinner looms
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Kevin Buckland and Tom Westbrook
TOKYO/SINGAPORE, Dec 9 (Reuters) - The dollar slipped in Asia on Wednesday as signs of progress in beating back the COVID-19 pandemic sapped demand for the safest assets, while the pound was on tenterhooks ahead of a leaders meeting to try and salvage a Brexit trade deal.
The U.S. currency declined against most of its major peers as Britain began mass vaccinations and the U.S. edged closer to more fiscal stimulus. It slipped about 0.4% against the risk-sensitive Aussie AUD=D3 and fell to a 2-1/2 year low against the yuan.
Sterling steadied above recent lows before a Wednesday dinner between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in Brussels that is seen as a last roll of the dice for a Brexit trade deal. a basket of currencies =USD , the dollar was 0.1% lower at 90.816, less than half a percent above a two-and-a-half-year trough it hit on Friday.
It slipped about 0.2% against the euro EUR= to $1.2126 and 0.3% and is tracking toward an annual loss of more than 7.5% against the common currency, its largest since 2017, as investors figure on low rates keeping it under pressure for a while yet.
The dollar dropped to 6.4975 yuan in offshore trade CNH= and 6.5229 onshore CNY= , which puts the yuan up by more than 10% from its May lows, boosted by the softer dollar and steady inflows into Chinese stocks and bonds. CNY/
"We expect dollar weakness and the risk positivity to continue into next year," said Craig Chan, head of global FX strategy at Nomura, on an outlook call with journalists.
He forecasts the euro to hit $1.28 and the yuan to reach 6.2500 per dollar by the end of next year.
DINNER DATE
Sterling GBP= , which has whipsawed while trade negotiations are deadlocked, steadied against the weaker dollar but remained on edge going in to the leaders' meeting. GBP/
Britain faces a chaotic split from the European Union if no trade deal can be struck by the end of the year because Brexit transition arrangements would expire without measures to protect about $1 trillion in annual trade from tariffs and quotas.
Volatility gauges for the pound have soared to reflect what traders reckon is a wild ride ahead. One-week sterling implied volatility GBPSWO= hit a fresh eight-month high on Wednesday and the premium of puts to calls GBP1MRR= is elevated.
"Put a gun to my head and I'd be a buyer of sterling, as I see the risk skewed that Boris would come back with some sort of agreement," said Chris Weston at Melbourne broker Pepperstone, though he added rewards for such a bet might be limited.
"Broad positioning is short sterling, but not at extremes by any means. This limits the prospect we get an exaggerated short-covering rally to say $1.3800 or $1.4000."
Meanwhile, Britain began the world's first mass COVID-19 vaccination on Tuesday, the same day that President-elect Joe Biden pledged to vaccinate 100 million Americans after taking office. Both moves supported markets' confidence. are also tracking negotiations over U.S. coronavirus aid, with the Trump administration proposing a $916 billion package on Tuesday after congressional Democrats rejected a slimmer plan. Japanese yen JPY= was little changed at 104.14 per greenback, but J.P. Morgan sees a break of the psychologically key 100 level as only a matter of time with the U.S. Federal Reserve maintaining ultra-easy monetary conditions. [JPY/}
"When the Fed has the policy rate at zero, the dollar tends to weaken against the yen in a risk-on environment," said Tohru Sasaki, the bank's head of Japan market research in Tokyo. "Dollar-yen is getting heavier and heavier."
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Currency bid prices at 1:31PM in Singapore (0531 GMT) Description
RIC
Last
U.S. Close Pct Change
YTD Pct
High Bid
Low Bid
Previous
Change
Session
Euro/Dollar
EUR=EBS
$1.2127
$1.2104
+0.19%
+8.17%
+1.2130
+1.2102 Dollar/Yen
JPY=D3
104.1400
104.1600
+0.00%
-4.10%
+104.1650 +104.1350 Euro/Yen
EURJPY=
126.29
126.07
+0.17%
+3.56%
+126.3100 +126.0600 Dollar/Swiss
0.8880
0.8890
-0.11%
-8.23%
+0.8890
+0.8880 Sterling/Dollar GBP=D3
1.3374
1.3359
+0.13%
+0.85%
+1.3380
+1.3354 Dollar/Canadian CAD=D3
1.2799
1.2821
-0.16%
-1.47%
+1.2819
+1.2799 Aussie/Dollar
AUD=D3
0.7439
0.7410
+0.40%
+6.03%
+0.7444
+0.7405 NZ
NZD=D3
0.7063
0.7044
+0.27%
+4.96%
+0.7066
+0.7036 Dollar/Dollar
All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
+0.7036