(Adds European PMIs, quote, new milestone) * Dollar softens against most majors; virus worries lift yen * China"s yuan soars * Focus turns to Georgia Senate race * Bitcoin slumps after stellar rally By Julien Ponthus LONDON, Jan 4 (Reuters) - The U.S. dollar fell to mid-2018 lows on Monday as bullish sentiment across global markets prompted investors to buy riskier currencies such as the Chinese yuan and the euro, despite a resurgent pandemic. With U.S. interest rates pinned at record lows, massive U.S. deficits and a belief that rebounding world trade will drive non-dollar currencies higher, the dollar weakened on the first day of trading in 2021 after falling nearly 7% last year. The Chinese currency was the biggest beneficiary of the weak dollar trade. The yuan rocketed to a two-and-a-half-year high. "The U.S. dollar slipped further through the threshold of the new year as global risk sentiment stayed buoyant", said Alvin Tan, an FX strategist at RBC Capital Markets. The dollar index touched a low of 89.415, a level last seen in mid-2018, and was down 0.3% at 89.529. The Chinese yuan rose to 6.44 yuan per dollar after Beijing cut the weighting of the U.S. dollar in a key currency index basket. That could push the yuan"s value higher against its peers this year, analysts said, while Chinese factory activity continued to accelerate in December. The euro, which had dipped on New Year"s Eve profit-taking, rose 0.6% to $1.2294, just short of 2018 highs with positive economic indicators backing the single currency. IHS Markit economist Phil Smith said the latest data showed German manufacturing continued to power on at the end of the year. "With the rollout of the COVID vaccines, it"s hoped that the pandemic will become less and less of a hindrance to demand and that investment will continue to recover in the year ahead." Also, a closely watched gauge of growth in British manufacturing activity rose to its highest level in three years as factories rushed to complete work before the end of the post-Brexit transition period on Dec. 31. Sterling abandoned most of its early gains against the dollar, retreating below $1.37 but close to levels last seen in early 2018. The safe-haven yen rose 0.4% to 102.87 per dollar, after Japanese Prime Minister Yoshihide Suga said his government was mulling a state of emergency in Tokyo as coronavirus cases rise. Bitcoin had a rough ride, falling as low as $27,734 at one point, after making dramatic gains over the new year"s break. It was last down 6.4% at $30.980. The world"s most popular cryptocurrency surged over $30,000 for the first time on Saturday, touched a record high of $34,800 a day later, as investors continued to bet the digital currency was on its way to becoming a mainstream asset. ======================================================== Currency bid prices at 12:08PM in London (01208 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.2291 $1.2218 +0.61% +0.61% +1.2301 +1.2211 Dollar/Yen 102.8950 103.2900 -0.46% -0.47% +103.3100 +102.7300 Euro/Yen 126.47 126.15 +0.25% -0.35% +126.5200 +126.1100 Dollar/Swiss 0.8798 0.8847 -0.54% -0.54% +0.8845 +0.8789 Sterling/Dollar 1.3647 1.3662 -0.10% -0.10% +1.3703 +1.3645 Dollar/Canadian 1.2694 1.2734 -0.43% -0.31% +1.2735 +1.2666 Aussie/Dollar 0.7719 0.7693 +0.34% +0.34% +0.7740 +0.7682 NZ 0.7208 0.7181 +0.40% +0.40% +0.7230 +0.7183 Dollar/Dollar All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ (Reporting by Julien Ponthus; editing by Lincoln Feast, Larry King)