GOOD, BAD AND JUST UGLY

From inflation to deflation, or de-coupling to contagion, it was a year of unprecedented swings, not only in global markets but also in conventional wisdom.

Oil CLc1 started the year setting a series of records that culminated with prices hitting a peak at little under $150 in July.

It heads to the end of year below $39 a barrel, as investors have adjusted to the new economic order.

Prices will rise in 2009, but not by much. Analysts are forecasting an average of $49 a barrel for U.S. crude in the first quarter, and an average of $58.48 for the year.

In between, bursts of volatility in oil prices are expected as shown by the violence between Israel and Islamic group Hamas that sent oil prices jumping as much as 12 percent on Monday.

"Basically, the situation globally is much worse than expected. It's all very pessimistic numbers," said Tetsu Emori, a fund manager at Astmax Co Ltd in Japan.

Meanwhile, the U.S. dollar ends on a weakening tone, with the safe-haven bid that only a few months ago sent the greenback rallying all but forgotten now that the Federal Reserve intends to keep U.S. interest rates at near zero.

Japan's yen surged about 19 percent this year to post its biggest annual percentage gain since 1987, denting the prospect of exporters in the world's second-largest economy.

British sterling is pinned at near record lows amid a truly dire outlook for the U.K. economy.

The euro edged up to $1.4115 in Asian trade, from $1.4072 late on New York on Tuesday, while the dollar was down almost 1 percent .DXY at 80.627 against a basket of currencies.

The euro was holding firm at 97.75 pence against the sterling, having touched a high of 98.05 on Tuesday, near parity for the first time since its launch in 1999.

Assets seen as safer during times of trouble outperformed. Gold was trading at $865.35 an ounce, down $6.75 from New York's notional close on Tuesday, but it still ends the year as one of few commodities to end the year firmer despite its traditional role as an inflation hedge.

Among the best bets this year were government bonds. U.S. Treasury benchmark yields have dropped this month to their lowest since 1950, amid an intense bid for safety, rock bottom rates and expected Fed buybacks of debt, including of mortgage-backed securities.

Benchmark 10-year notes dipped 4/32 in price to yield 2.067 percent on Wednesday, near the five-decade low of 2.04 percent struck earlier in the month. For the year, yields have tumbled 1.96 percentage points for their biggest yearly drop since 1995 and the second biggest in the last 20 years. (Additional reporting by Simone Giuliani in SYDNEY and Parvathy Ullatil in HONG KONG, Editing by Lincoln Feast)