EEarly trade in New Yor: Dollar holds firm before holidays, sterling slips on Brexit worries

The dollar held near a two-week high against a basket of currencies on Monday as the North American trading session kicked off for the holiday-shortened week, while sterling fell on concerns over the British government's hard line on Brexit talks.

The dollar index, which measures the greenback against six major currencies, was up 0.02% at 97.71. The index rose 0.3% on Friday after the release of upbeat US economic data late last week.

The dollar, up 1.6% for the year as measured by the dollar index, has broadly benefited during bouts of risk aversion - because it is considered a safe-haven currency - and when markets have rallied, because the US economy is outperforming other parts of the world.

"The USD's bounce last week sets it up for a modest "Santa rally" perhaps but we rather view scope for gains as limited in the medium to longer run still," Shaun Osborne, chief FX strategist at Scotiabank, said in a note.

The dollar has also been supported since Washington and Beijing came to an interim trade agreement earlier this month. China said on Monday it would lower tariffs on some products next year.

Currencies linked closely to the prospects for global trade rose on Monday, with the Aussie up 0.16% and the kiwi up 0.12%.

With the economic calendar light before the holidays, analysts doubt major currencies will post significant moves this week, analysts said.

The future path of the dollar is likely linked to what kind of benefits non-US currencies reap from the recent easing in trade-related tensions between the United States and China.

"With the Fed likely on hold next year, the key to a weaker dollar in 2020 could depend on further momentum from Europe," said Edward Moya, senior market analyst at OANDA.

"Europe is likely to benefit the most from continued progress with the US-China trade war and if we see any hints of a manufacturing rebound the euro could eye the 1.15 level," Moya said.

On Monday, the euro was 0.06% higher at $1.1085.

The Canadian dollar was trading 0.16% lower against the greenback at 1.3173 to the greenback, or 75.89 US cents, after disappointing data.

Canada's economy unexpectedly shrank by 0.1% in October, the first monthly decline since February, partly because of a US auto strike that hit manufacturing, Statistics Canada data indicated on Monday.

Sterling fell to a three-week low against the dollar on Monday, pulled down in holiday-thinned trade by nagging concern over the British government's hard line on Brexit talks. The pound was 0.51% lower.