(Repeting, adding named item codes)
* Swiss franc falls to 7-month low against euro
* Pound falls; no major Brexit rally in sight
* Dollar erases losses after falling to one-week low as U.S. government shutdown averted
* Southern (NYSE:SO) European bond yields fall
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Yoruk Bahceli
AMSTERDAM, Dec 28 (Reuters) - The Swiss franc fell to its lowest in nearly seven months against the euro on Monday alongside the pound as the Brexit trade deal remained in focus, while the dollar recovered after falling on U.S. President Donald Trump's approval of a COVID-19 aid bill that averted a government shutdown.
The Swiss franc fell to 1.08915 against the euro, its lowest since June 8. EURCHF=EBS
At 1232 GMT, it was down 0.1% at 1.08685 and down similarly against the dollar. CHF=EBS
"What we are seeing is a continuation of the pricing out of hard Brexit risk," said Ulrich Leuchtmann, head of FX research at Commerzbank (DE:CBKG) in Frankfurt.
"I think a lot of market participants saw Swissie as an alternative to the euro, (which) would have been harder affected by a hard Brexit," he said. Investors were likely to close out of such positions in the following sessions, Leuchtmann added.
The euro, which rose modestly earlier, was down 0.2% at $1.22020 EUR=EBS .
Sterling fell as much as 0.4% against the dollar to $1.3475 after an earlier rise. It fell more sharply against the euro, last down 0.7% at 90.440 pence. EURGBP=D3
"Those who have expected a GBP rally after the deal announcement must have been disappointed so far. No wonder that some of them are closing their GBP-long positions now," Leuchtmann said.
While the deal came as a relief to investors, the bare-bones nature of the pact, which doesn't cover financial services, leaves Britain far more detached from the EU, analysts say, suggesting any subsequent gains will be modest and the discount that has dogged UK assets since 2016 will not vanish soon. pound has not maintained a major rally on the back of the deal, up just 0.9% against the dollar since Wednesday's open, the day reports first emerged that an agreement was likely.
In the United States, Trump signed into law a $2.3 trillion pandemic aid and spending package, averting a partial federal government shutdown that would have started on Tuesday. initially pushed the safe-haven dollar to a one-week low against a basket of currencies at 89.980, but the greenback recovered and was last unchanged at 90.357. DXY=
With dollar recovery, trade-sensitive currencies pared earlier gains. The Australian dollar was last down 0.2% at 75.855 U.S. cents AUD=D3 and Sweden's crown was down 0.3% after touching a new high since early 2018 against the U.S. dollar at $8.2200. SEK=D3
"As far as the U.S. stimulus package, obviously it was a relief that Trump... said OK to this but nevertheless I don't think it was a huge surprise to markets," said Johan Javeus, chief strategist at SEB in Stockholm.
Javeus cautioned not reading too much into market moves given holiday trading, but added investors were not taking the risk of government shutdown as seriously as they did in previous years.
Benchmark German 10-year government bond yields showed little reaction, down 1 basis point at -0.56% DE10YT=RR and outperforming 10-year Treasury yields, which were up 3 bps ahead of an auction. US10YT=RR
Yields on 10-year Southern European bonds - deemed riskier with lower credit ratings - fell 4-5 bps. IT10YT=RR ES10YT=RR PT10YT=RR
Althea Spinozzi, fixed income strategist at Saxo Bank in Copenhagen, noted data from Italy showing 390,000 non-food and market services businesses will close for good this year. support will be needed from the European Commission and the ECB which will inevitably push yields further down, with the periphery being the major beneficiary," she said.
In Asia, the yuan crept up after China's central bank lifted its official guidance level to the highest in 30 months to 6.5280 against the dollar onshore. It was last unchanged at 6.5401. CNY=CFXS and down 0.2% in the offshore market. CNH=EBS