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FOREX-Dollar steadies above 7-week lows as markets await clarity on US stimulus
Published at 22/10/2020 at 09:07

* U.S. stimulus talks remain in focus

* U.S. dollar index holds above 7-week lows

* Graphic: World FX rates in 2020

By Dhara Ranasinghe

LONDON, Oct 22 (Reuters) - The dollar was steady above seven-week lows on Thursday, gaining some respite as hopes of a fiscal package in the United States ahead of the November elections crumbled once again.

Progress towards a U.S. stimulus deal has boosted sentiment in world markets and lifted demand for riskier assets in recent sessions - weighing on the safe-haven dollar, which tends to weaken when risk appetite picks up.

But pressure on the currency eased after U.S. President Donald Trump on Wednesday accused Democrats of being unwilling to craft an acceptable compromise.

In early London trade, the dollar index was a touch lower against a basket of currencies at 92.612, but holding above its lowest level since Sept. 2 hit Wednesday.

The euro edged 0.16% lower to $1.18420, nudging down one-month highs of $1.18805 hit on Wednesday.

The single currency was taking a breather having rallied against the greenback, said Commerzbank FX analyst Esther Reichelt.

"The U.S. Presidential elections are only 12 days away, before that nobody wants to commit too much to a particular direction in euro/dollar," she said in a note.

"In particular as hopes of a fiscal package in the U.S. ahead of the elections are crumbling once again, as it is not just an agreement between Democrats and the White House that is needed."

Japan's yen drifted away from Wednesday's four-week high of 104.345, last sitting at 104.74 against the greenback.

Indeed, most major currencies drifted sideways as investors waited for new direction. A final debate between President Trump and Democratic rival Joe Biden takes place later in the day.

Analysts said the dollar has also been pressured by a surge in currencies such as sterling , which jumped to a six-week high on Wednesday after Britain's chief Brexit negotiator said talks with the European Union would resume on Thursday.

Sterling was last trading at $1.3145, little changed on the day.

The Australian dollar was 0.1% softer versus the greenback, while the New Zealand dollar was a touch firmer at $0.6664 - up from the $0.6551 low touched on Tuesday.

Elsewhere, the Chinese yuan retreated from a 27-month high on signs that the authorities have become increasingly wary over the recent rapid gains in the currency.

The offshore Chinese yuan was last down almost a fifth of a percent at 6.6548 per dollar.

(Reporting by Dhara Ranasinghe; Additional reporting by Eimi Yamamitsu in TOKYO; Editing by Alex Richardson)

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