* Dollar index stable as focus returns to U.S. Fed rate hike path
* Sterling gives up nearly all its early gains
* Yen trades flat versus the greenback
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Vatsal Srivastava
SINGAPORE, Nov 5 (Reuters) - The dollar held steady against most of its major peers on Monday, supported by expectations of tighter U.S. monetary policy, while sterling gave up nearly all its recent gains as investors sought clarity around Brexit. A Sunday Times report that an all-UK customs deal will be written into the agreement governing Britain’s withdrawal from the EU had cheered investors who sent the pound to $1.3062 on Monday, the highest since Oct. 22.
The dollar’s index versus six major peers was steady at 96.50 on Monday.
Analysts are bullish on the greenback, supported by strong economic growth and see the Federal Reserve on track to raise interest rates in December, followed by another two hikes by mid-2019.
Data out on Friday showed that U.S. jobs growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years.
“The jobs data has reaffirmed the dollar’s strength due to the rates differential factor going forward. The risk is that the markets may be caught surprised by a more hawkish Fed,” said Rodrigo Catril, senior currency strategist at NAB.
Ten-year U.S. Treasury yields were at 3.2 percent on Monday, having risen on Friday on the back of the jobs report.
“With the tight labour market starting to deliver meaningful wage growth, the Fed is on track to another quarterly rate increase at next month’s FOMC meeting. Our view remains for the ceiling of the Fed Funds Rate to increase to 2.50 percent and 3.50 percent by the end of 2018 and 2019 respectively,” said Eugene Leow, currency strategist at DBS.
Such a rise is expected to help the dollar firm against the safe haven Japanese yen, which traded flat at 113.22 on Monday.
The dollar weakened by 0.66 percent versus the yen in the month of October as news flow around trade tensions, geopolitical risks and a global economic slowdown gave the Japanese currency a flight-to-safety boost.
“The dollar/yen will follow the U.S. 10-year yields higher. We don’t see much downside as of now,” added Catril.
Currency traders will also be focussing on U.S. midterm elections on Tuesday U.S. time.
Opinion polls show a strong chance that the Democratic Party could win control of the House of Representatives after two years of wielding no practical political power in Washington, with President Donald Trump’s Republican Party likely to hold the Senate.
Despite Brexit relief supporting risk appetite in currency markets, the UK’s Telegraph newspaper reported that significant hurdles still remain to be overcome.
The pound retraced its intra-day high in thin Asian early trade, but was up 0.13 percent for the day. It has lost 3.7 percent versus the greenback year to date.
The positive sentiment around a smooth Brexit also gave the euro a small bid in early Asian trade. However, the single currency gave up all its gains and traded flat at $1.1385.
The offshore yuan traded lower versus the dollar at 6.9123.
Offshore-traded yuan gained versus the greenback in the last two sessions, supported by rising hopes that trade tension between China and the United States will ease.
The Australian dollar was trading 0.14 percent lower at $0.7186.
Reporting by Vatsal Srivastava; Editing by Sam Holmes and Eric Meijer