FOREX-Dollar holds ground as rising COVID-19 cases boost safe-haven demand

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Eimi Yamamitsu
TOKYO, Oct 29 (Reuters) - The dollar held gains against a
basket of major currencies on Thursday as escalating coronavirus
cases in Europe stoked investor fears that fresh lockdowns would
further hit the already fragile economic recovery.
The safe-haven greenback steadied against a basket of six
currencies =USD at 93.39, taking a pause after its 0.3% gains
in early trade.
Concerns of further damage to the economy grew as France and
Germany went back into lockdown on Wednesday, as a massive
second wave of coronavirus cases threatened to overwhelm
Europe. "The vibe is similar to what it was like in late February to
early March," said Rikiya Takebe, senior strategist at Okasan
Online Securities, referring to the time when the coronavirus
started to spread in the U.S. and Europe.
"Back then, there was a shift to dollar-buying to prevent
risks in case of emergency, leading to a higher dollar. I think
the current move on the market is somewhat the same," he said.
The euro EUR=EBS changed hands at $1.1753 after sliding to
a one-week low of $1.1718 overnight. It moderately rose against
the Japanese yen EURJPY= , last fetching 122.79 yen after
hitting its weakest levels since July overnight.
Amid surging cases across Europe, the European Central Bank
at its meeting is expected to resist pressure on Thursday to
unveil new stimulus measures, but will likely pave the way for
action in December. "EUR can fall further if ECB President Christine Lagarde
lays the ground work for further policy easing at her post
meeting press conference," said Commonwealth Bank of Australia
currency analyst Kim Mundy in a note.
Traders also braced for volatility with the U.S. election
less than a week away, while the country, like Europe, also
faces an increase in coronavirus infections.
With former Vice President Joe Biden consistently leading in
the polls over President Donald Trump, traders are cautiously
betting on his victory and a possible "blue wave" outcome, where
Democrats control both chambers of Congress.
"While Biden is taking the lead, Trump has been catching up
in some parts of swing states," said Shinichiro Kadota, senior
strategist at Barclays.
"There is certainly a possibility of a higher volatility in
the market if it becomes a closer battle, involving risks such
as full results not being released (on the election day)," he
said.
The onshore yuan CNY= rose modestly to 6.7104, still away
from a 27-month high hit last week.
Offshore, the yuan traded at 6.7095 per dollar CNH=EBS ,
with one-week yuan implied volatility CNHSWO= hitting a more
than five-year high as the U.S. elections neared.
Data due on Thursday includes U.S. third-quarter gross
domestic product, which analysts expect to show record growth
but not enough to make up for the pandemic impact.
The greenback firmed against the Japanese yen at 104.45 yen
JPY=EBS , having dropped to a more than one-month low on
Wednesday.
The Bank of Japan on Thursday kept its monetary policy
steady, while signalling that it has delivered enough stimulus
for now. In the quarterly report, the BOJ trimmed its growth
forecast but kept an upbeat outlook for a moderate recovery.
BOJ Governor Haruhiko Kuroda will hold a news conference
later in the day to explain the decision.
The Aussie AUD=D3 drifted away from its near one-week low
of $0.7038 marked overnight. It last sat at $0.7064, supported
by a more than 1% gain in U.S. stock futures.
Across the Tasman Sea, the kiwi NZD=D3 edged higher
against its U.S. counterpart, last up 0.18% to 0.6649.