* China Dec exports -4.4 pct y/y, biggest drop in 2 years
* Yen rallies
* Euro, sterling gain marginally over the dollar
By Tom Finn
LONDON, Jan 14 (Reuters) - The Australian dollar and kiwidollar, gauges of global risk appetite, fell on Monday on fearsof a slowdown in China's economy prompted by a contraction inChinese exports.
Market sentiment swung negative after data showed thatChina's December exports unexpectedly fell, pointing to weaknessin the world's second-largest economy and a gloomy growthpicture. urn:newsml:reuters.com:*:nZZN07HC01
The data took its toll on the Australian dollar AUD=D3 andNew Zealand dollar NZD=d3 , which both fell more than 0.4percent.
China is Australia's largest trade partner and negativesentiment about its economy does not bode well for the Aussiedollar.
Fears of a Chinese slowdown also hit the offshore yuan CNH=EBS .
The currency rallied 1.5 percent against the dollar lastweek, its biggest weekly rise since January 2017, seeminglyincongruent with recent sluggishness in China's economy.
"The (yuan) rally is largely due to the optimism surroundingthe (U.S.-China) trade talks," said Ulrich Leuchtmann, head ofFX at Commerzbank.
"As long as the yuan remains steady, we are unlikely to seea significant dollar rally overall," he added.
Monday's risk-off mood led traders to buy the safe-havenJapanese yen JPY=EBS , which rose half a percent versus thegreenback.
The dollar index .DXY was at 95.56, down 0.1 percent.
"With the Federal Reserve signalling a pause in thetightening cycle... we don't expect today's China trade numbersto have a long lasting negative impact on sentiment," said ChrisTurner, head of foreign exchange strategy at ING in London.
After a stellar 2018 in which the greenback gained 4.3percent as the U.S. central bank hiked rates four times,investors now expect the Fed to halt its monetary tighteningpolicy.
Chairman Jerome Powell reiterated last week that the Fed hasthe ability to be patient on monetary policy given thatinflation remains stable.
The euro EUR=EBS on Monday was relatively unchanged at$1.1464. The single currency lost 0.3 percent on Friday afterdata showed that Italy, the euro zone's third-largest economy,was at risk of recession.
Elsewhere, the British pound GBP=D3 rose 0.3 percent to a7-week high of $1.2879 at the start of what is expected to be ahighly volatile week.
Prime Minister Theresa May warned on Monday that failure toapprove her Brexit deal could lead to Britain eventually stayingin the European Union. urn:newsml:reuters.com:*:nL8N1ZE3FS
She must win a vote in parliament on Tuesday to get herBrexit deal approved or risk a chaotic exit for Britain from theEuropean Union. The numbers are not in May's favour and herchances of winning the vote look slim. (Additional reporting by Vatsal Srivastava, editing by EdOsmondEditing by Raissa Kasolowsky) ((email@example.com; +44 2075427508 ; Reuters Messaging:firstname.lastname@example.org))