* Pound falls 0.5% as Brexit deadline extended to Sunday
* Dollar firm amid little tangible progress in U.S. stimulus talks
* ECB seen expanding asset purchases at policy meeting Thursday
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
TOKYO, Dec 10 (Reuters) - Sterling slid on Thursday after British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen gave negotiators until the end of the weekend to decide if a trade pact can be struck after failing to bridge gaps themselves.
The European Commission and Britain remained "far apart" on a post-Brexit trade deal, the bloc's chief executive said after what she described as a "lively" dinner with Johnson.
"It looks like there won't be any agreement to present to the EU summit starting today," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.
"Markets have been quite optimistic about a deal. I'm a bit surprised."
Bank of England Governor Andrew Bailey has warned a no-deal Brexit would cause longer-term damage to Britain's economy than the COVID-19 pandemic, and the impact of the change might be felt for decades.
The British pound dropped to as low as $1.3311 and last stood at $1.3365, down 0.3% on the day, though it stayed above this week's low of $1.3225 set on Monday.
"There is some likelihood now that a deal won't be reached this week, putting the pound at risk of falling to $1.28," which would be the lowest since September, said Carol Kong, a currency analyst at Commonwealth Bank of Australia in Sydney.
Against the euro, sterling slid 0.4% to 90.446 pence per euro.
The U.S. dollar, which tends to fall when risk appetite is strong, held firm against other major currencies as an agreement on U.S. stimulus remained elusive, with proposals and counterproposals on COVID-19 aid flying around the U.S. Capitol.
The dollar index stood at 91.019, off Friday's 2 1/2-year low of 90.471.
The dollar rose slightly to 104.435 yen. It was little changed at $1.2093 per euro, after four straight days of gains brought it off the 2 1/2-year low of $1.2177 touched on Friday.
"The dollar can fall further if a U.S. fiscal stimulus deal is reached in the near term." said Commonwealth Bank's Kong, who forecasts a decline to $1.24 per euro -- a level unseen since April 2018 -- by the middle of next year.
Meanwhile, the European Central Bank is widely expected to expand its stimulus measures to prop up the recession-hit currency bloc at its policy meeting later on Thursday.
ECB President Christine Lagarde has made clear in recent weeks that a bigger Pandemic Emergency Purchase Programme (PEPP) and more subsidised long-term loans for banks will form the backbone of its policy measures.
Elsewhere, the Australian dollar rose 0.4% to $0.7469 , approaching the 2 1/2-year high of $0.7485 reached Wednesday, while the offshore Chinese yuan also hovered below its 2 1/2-year high set on Wednesday to trade at 6.5265 per dollar. (Reporting by Hideyuki Sano; Editing by David Gregorio)
