Dollar up against trade-sensitive units in Europe

The dollar firmed against trade-sensitive currencies on Monday with worries about US-China trade tensions resurfacing as a key deadline loomed large, while Britain's pound strengthened on the latest polls ahead of this week's election.

Sterling hit a fresh 2-1/2 year high against the euro after an opinion poll showed the governing Conservative Party has extended its lead over rivals ahead of Thursday's national election. Attention shifted to US Federal Reserve and European Central Bank policy meetings this week.

A fast-approaching deadline for the next wave of US tariffs on Chinese goods meant some caution in global markets, benefiting the greenback against currencies sensitive to the trade war such as the Australian and New Zealand dollars.

Top White House economic adviser Larry Kudlow said on Friday that a Dec. 15 deadline is still in place to impose a new round of US tariffs on Chinese consumer goods, but President Donald Trump likes where trade talks with China are going.

"If we see Donald Trump decide not to delay tariffs, that would lead to a risk off reaction in markets," said Nomura currency strategist Jordan Rochester.

"We don't expect tariffs to go into effect as the talks are ongoing," he said, adding he did not expect any "fireworks" from the central bank meetings.

The Australian dollar was down almost a third of a percent at $0.6823, while New Zealand's currency was a fifth of a percent weaker at $0.6553. The offshore Chinese currency slipped 0.2% to 7.0355 yuan per dollar.

Data showing China's exports shrank for the fourth consecutive month in November, underscored persistent pressures on manufacturers from the Sino-US trade war.

"Our base case scenario is for the Trump administration to announce a postponement of the implementation of the December tariffs," analysts at MUFG said in a note.

"On the flip side, it seems unlikely for a Phase One deal to be officially announced before Sunday, although it is still possible to see one before the end of the year."

The dollar index drifted 0.1% lower to 97.580 after rising 0.3% on Friday on news that US nonfarm payrolls increased by 266,000 jobs last month, the biggest gain in 10 months.

Europe's single currency was a touch firmer at $1.1073 , up from Friday's one-week low of $1.10395.

The dollar changed hands at 108.48 yen, little changed on the day.

Friday's jobs numbers were viewed as positive for the greenback, bolstering expectations that the Fed would this week continue to signal a pause in its rate-cutting cycle.

"As long as more people are working and getting paid more, consumer demand is likely to hold up - that should keep the US economy going and reduce the likelihood of the Fed cutting rates again," said Marshall Gittler, strategist at ACLS Global.

Indeed, speculators raised their net long bets on the US dollar in the latest week to a five-month high, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday.

Sterling hit a seven-month high at $1.3180 and a 2-1/2 year peak versus the euro at 83.94 after latest polls fuelled optimism that Thursday's election will end near-term Brexit uncertainty.

The ruling Conservative Party extended its lead over the opposition Labour Party to 14 percentage points, up from 9 a week ago, an opinion poll by Survation showed on Monday.