(Updates prices, adds graphic)
* Euro jumps briefly against dollar, yen at start of Asian
* Still up 0.4 pct vs dollar, 1 pct vs yen
* Moves prompt comparisons with sterling flash crash in
* 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 surge 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 climbed to as much as $1.07, two full cents higher,
and despite an immediate retreat was still up 0.6 percent on the
day at $1.0563 in morning trade in Europe. It was also 1
percent higher on the day at 123.45 yen.
The yo-yo moves overnight 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 bulk 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 dollar are one of the big consensus
plays for investors going into 2017, although signs of doubt
have appeared in recent weeks, with analysts beginning to wonder
how much appreciation a Donald Trump White House will tolerate.
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. A number of major banks have predicted
a test of parity early next year.
The dollar index, which tracks the greenback against a
basket of six major rivals, also slipped half a percent to
102.18, 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.
"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 dollar, making it the worst
performing Asian currency.
Beijing announced late on Thursday it would nearly double
the number of foreign currencies in a basket that is used to set
the yuan's value.
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 widely expected
to weaken further against the greenback in 2017.
(Additional reporting by Tokyo markets team, editing by Larry