FOREX-Pound holds gains as Brexit Party pledge eases hung parliament fears

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* Brexit Party stands down in Conservative seats

* Rising HK tensions, U.S.-China tariff rollback uncertainty eyed

* Markets await 's "trade and economic policy" speech

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tomo Uetake

TOKYO, Nov 12 (Reuters) - Sterling held gains in early Asian trade on Tuesday, having hit a six-month high versus the euro and rising as much as 1% against the dollar overnight, as the prospect of a hung parliament in UK elections eased slightly.

In a significant boost for Prime Minister Boris Johnson ahead of the Dec. 12 election, Brexit Party leader Nigel Farage said his party was standing down candidates in seats won by the Conservatives in 2017 and would instead focus on challenging anti-Brexit politicians.

The pound rallied to as high as $1.2896 on the news, which the market had interpreted as reducing the probability of a hung- or Labour led- government. The currency later eased to $1.2858.

Against the euro, the sterling strengthened to its highest level since May 8, at 85.62 pence.

Lee Hardman, a strategist at MUFG said the Brexit Party standing down candidates could clear the way for the Conservatives to pass their Brexit withdrawal deal.

The pound had already risen above $1.28 before Farage's announcement, after data showed the UK economy had narrowly missed a recession in the third quarter of 2019, expanding 0.3%.

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"The sterling's move was notable because other currencies were quiet, mainly because the U.S. market was closed," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"Although it certainly is positive the Conservatives got greater support, I'm not all that optimistic because I think anything can happen in the coming month."

Also weighing on the dollar were doubts about Beijing's and Washington's potential agreement to roll back tariffs and concerns over rising Hong Kong tensions, although trading volumes were lower than usual with U.S. markets partially closed on Monday for Veterans Day.

"The dollar's recent rally on the back of rising Treasury yields paused yesterday as the U.S. cash bond market was closed," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

Story continues

The euro last changed hands at $1.1034, while the greenback last traded at 109.12 yen, both little changed on the day.

In Hong Kong, riot police fired tear gas at a university campus on early Tuesday, a day after a protester was shot and a man set on fire in some of the most dramatic unrest to rock the Chinese-ruled city in more than five months.

Also, caution ruled ahead of a speech by President to the Economic Club of New York later in the day in case there was any new word on the Sino-U.S. "phase one" trade deal. (Reporting by Tomo Uetake; Additional reporting by Elizabeth Howcroft; Editing by Sam Holmes)

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