SYDNEY, Dec 31 (Reuters) - The dollar dipped to a near three-week low against the yen in thin year-end volume on Tuesday as investors favoured riskier assets, led by renewed optimism about global growth.
The greenback was off 0.1% at 108.77 against the Japanese yen, on track for its third straight session of losses and within a whisker of Monday's 108.74, the weakest since Dec. 12.
The dollar index, which measures the currency against a basket of rivals, was flat at 96.728 in early Asian trade.
On Friday, the index had suffered its biggest one-day fall since March, which left its gains for the year at under 0.6%, compared with returns of 4.4% in 2018. It is now on track for the smallest rise since 2013.
Encouraging news on the Sino-U.S. trade deal boosted risk sentiment in currency markets overnight.
The White House's trade adviser, Peter Navarro, on Monday said the U.S.-China Phase 1 trade deal would likely be signed in the next week, but said confirmation would come from President Donald Trump or the U.S. Trade Representative.
Increased optimism about U.S.-China trade relations and an improved global growth outlook drove investors out of other safe-haven assets like Treasury bonds while the risk-sensitive Australian and New Zealand dollars jumped to five-month highs.
China's yuan strengthened a touch in the offshore market to 6.972 on Monday, its highest since Dec. 13. It was last at 6.9780.
Investor appetite for risk also helped drive the euro to a 4-1/2-month high of $1.121 on Monday. It was last up 0.1% at $1.1209. Signs that the euro zone economy may be stabilising have lifted the single currency in recent weeks.
Sterling was last treading water at $1.3114 against the dollar after rising 2.8% so far this year. Concerns that Britain is headed for a disruptive "hard Brexit" at the end of 2020 have hurt the pound since mid-December. (Reporting by Swati Pandey; Editing by Kim Coghill)