* Dollar's August bounce retraces slightly
* Euro, yen off overnight troughs
* Aussie under pressure ahead of RBA at 0430 GMT
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Aug 4 (Reuters) - A nascent rebound in the dollar
paused on Tuesday, as investors weighed mixed but encouraging
economic data against slow progress toward a U.S. government
spending package and another week of rising coronavirus deaths.
The U.S. dollar had its worst month in a decade in July but
began August with a bounce, pushing as high as $1.1695 per euro
on Monday, 1.8% above last week's two-year low.
That, along with other majors, had retraced a little by
morning trade in Asia, leaving the dollar at $1.1755 on the euro
EUR=EBS and 93.574 against a basket of currencies - below a
one-week top of 93.997 hit on Monday =USD .
The yen JPY= also recovered some overnight losses to sit
at 106.08 per dollar, as did Australian dollar AUD=D3 , though
it was 0.1% softer at $0.7117 ahead of a central bank meeting
later on Tuesday.
"At this juncture, the question markets have to decide is:
is this just a correction or is the dollar making a proper
come-back?" said analysts at ANZ Bank.
"Better manufacturing and strong equity markets are decent
supports," they wrote in a note. "But going against that we have
virus cases still rising rapidly, abundant liquidity and
rebounding commodity prices."
Chicago Fed President Charles Evans reiterated overnight
that the next help for the virus-battered U.S. economy must come
from fiscal policy. That is exactly where markets are focused,
with investors now watching signs of progress in Washington.
Top Democrats in Congress and White House negotiators on
Monday said they had made headway in talks on the latest
coronavirus relief bill, though an expired $600-per-week
unemployment benefit remains a sticking point. A better-than-expected expansion in the Institute for Supply
Management's U.S. manufacturing index was also a positive for
the dollar. But it came with a warning as output remains far below
pre-virus levels and the employment index was below forecasts,
at a still contractionary 44.3.
"The recovery cannot accelerate with the virus still not
under control in large segments of the global economy," said
Deutsche Bank's chief international strategist Alan Ruskin.
"We expect much more sensitivity to the August data, now
that 'the easy part' of the bounce back from lockdowns is done."
The United States had a second straight week of slowing
infections, but a fourth week in a row of rising deaths, a
Reuters analysis found, as new hotspots emerge there and around
the globe.
Cases are on the march again in Europe and Australia's
second-biggest city of Melbourne announced a curfew and fresh
restrictions on movement over the weekend to try and suppress an
outbreak there. That has dashed hopes that the Reserve Bank of Australia may
sound a little more upbeat on the outlook in its policy decision
due at 0430 GMT.
"There has been some discussion about the RBA cutting rates
given the shutdowns in Melbourne, but this is crazy talk," said
Chris Weston, head of research at Melbourne broker Pepperstone.
"We may get some increased level of concern," he said. "But
the support needed right now is not more easing of monetary
policy, but fiscal," and does not expect the Aussie to stay
below $0.7085 if it dips that far.
Elsewhere sterling GBP= recouped overnight losses to
steady at $1.3069 per dollar and elevated Sino-U.S. tension kept
the yuan on the weaker side of 7-per-dollar at 6.9814 in
offshore trade CNH= .
The New Zealand dollar NZD=D3 inched ahead to $0.6616.