FOREX-Dollar decline stalls as traders eye U.S. stimulus talks

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

By Eimi Yamamitsu
TOKYO, Dec 2 (Reuters) - The dollar stayed near a 2-1/2-year
low on Wednesday as investors assessed the likelihood of further
fiscal stimulus in the United States, while riskier currencies
held onto gains as investor confidence improved.
Against a basket of major currencies, the dollar index eased
at 91.19 =USD , near the lowest level since late April 2018 it
hit overnight.
The Euro and the Kiwi steadied after an overnight jump to
their 2 1/2-year highs as dollar weakened broadly on renewed
hopes for a coronavirus vaccine and U.S. fiscal stimulus.
U.S. Treasury Secretary Steve Mnuchin and House of
Representatives Speaker Nancy Pelosi held stimulus talks for the
first time since the Nov. 3 election, while a bipartisan group
of senators and House members proposed $908 billion worth of
coronavirus relief measures.
Pelosi said in a statement after the talks that Mnuchin
would review coronavirus relief proposals. U.S. Senate leader Mitch McConnell said on Tuesday that
Congress should include a fresh wave of coronavirus stimulus in
a must-pass $1.4 trillion spending bill aimed at heading off a
government shutdown in the midst of the pandemic. U.S. President-elect Joe Biden told the New York Times his
priority is getting a generous aid package through Congress even
before he takes office in January.
But traders were taking the reports cautiously.
"The currency market is sceptical whether these proposals
could be agreed in a swift manner, since hopes were shattered
once already when a stimulus package didn't come into fruition
before the presidential election," said Masafumi Yamamoto, chief
currency strategist at Mizuho Securities.
Also weighing on the safe-haven dollar was
weaker-than-expected U.S. manufacturing activity data and
speculation that the Federal Reserve will act to support the
economy before vaccinations become available. Fed Chair Jerome Powell and Mnuchin urged Congress to
provide more help for small businesses amid surging infections,
on concern that a vaccine may not arrive in time to keep more
companies from failing. The next Federal Open Market Committee policy meeting is on
Dec. 15-16.
Later on Wednesday, data including the U.S. ADP national
employment data and EU unemployment rate are due.
The Bank of Japan's deputy governor signalled the central
bank's readiness to extend pandemic-response programmes, adding
that the bank will "take additional easing steps without
hesitation as needed." Against the Japanese yen, the greenback changed hands at
104.41 JPY=EBS .
The euro held ground against the dollar after its strong
performance overnight as it hit the highest level since May
2018. It last fetched $1.2071 EUR=EBS .
Analysts said the common currency could be pressured as
investors grow wary that European Central Bank could act against
the rapid rise.
"The ECB might comment on the currency, but I think it would
be difficult for the bank to stop the euro appreciation. It'd be
hard not to favour the euro at a time when the euro zone is
trade surplus and people are selling the dollar," said Mitsuo
Imaizumi, chief FX strategist at Daiwa Securities.
Sterling also remained near a three-month peak against the
greenback after Times Radio said Brexit trade deal talks have
entered the "tunnel" stage of negotiations.
While the European Union's Brexit negotiator Michel Barnier
is due to update the bloc on trade talks later this week, a
senior British minister said on Tuesday there was still a chance
of a no-trade deal Brexit. The pound was little changed at $1.3415 GBP=D3 .
The risk-sensitive Aussie firmed to 0.7373 per dollar after
an upbeat data showed Australia's economy rebounded more
strongly than expected in the third quarter AUD=D3 .
Reserve Bank of Australia Governor Philip Lowe called the
figures "good" news, while noting there was a long way yet to
full recovery. Across the Tasman Sea, the New Zealand dollar changed hands
at $0.7068, holding steady near the highest level since April
2018 hit overnight NZD=D3 .
Bitcoin dropped around 0.7% to $18,635 after hitting a
record high just under $20,000 BTC=BTSP on Tuesday.