FOREX-Dollar dips, euro bumps higher as sentiment see-saws

* Dollar index up nearly 1% this week
* Aussie, kiwi sink as vaccine enthusiasm fades
* World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, Nov 12 (Reuters) - The dollar dipped on Thursday as
investors appeared to waver between optimism and caution over
expectations about a COVID-19 vaccine that is unlikely to avert
a grim winter in Europe and the United States as the pandemic's
second wave intensifies.
The dollar index USD= was down 0.15% by midday in London,
off earlier lows as risk appetite rebounded a little from Asian
trading hours. U.S. stock futures pared some of their losses in
the run up to the start of trading in New York. ESc1
The risk-sensitive Australian and New Zealand dollars made
up some ground, last trading only about 0.1% lower.
After an initial fall, the euro EUR=EBS bumped higher by
0.3% to $1.1823.
"Activity in euro/dollar was a little lighter yesterday and
I would suggest that after the vaccine related storm of activity
at the start of the week, and after the U.S. election news, that
the euro is trying to find its feet," said Jane Foley, head of
FX strategy at Rabobank.
"In the near-term it seems that $1.18 could be a pivot."
Foley added, however, that in the run up to the European
Central Bank meeting in December the market may feel a little
uncomfortable with long positions on the euro, particularly as
Q4 economic data for the euro zone comes through, which she said
would be "undoubtedly poor".
Europe is grappling with surging infections and new COVID-19
restrictions, with Germany's economic advisers trimming next
year's growth outlook. New York has ordered bars and restaurants
to close early as U.S. cases hit record levels.
Sterling GBP= licked its wounds as trade talks between
Britain and the European Union seemed set to drag on past yet
another deadline, raising the prospect that no trade deal may be
reached before Brexit transition arrangements end on Dec. 31.
The British currency last traded 0.4% lower to the dollar at
$1.3167 GBP=D3 . GBP/
The moves in the past week have for now put the brakes on a
long drop for the dollar, which had shed about 10% against a
basket of currencies between March and the announcement of
progress on Pfizer's COVID-19 vaccine on Monday.
Larger moves were held in check as investors await speeches
from Federal Reserve Chair Jerome Powell, European Central Bank
President Christine Lagarde and Bank of England Governor Andrew
Bailey at a central banking forum on Thursday.
"The weakness in broad USD and reflationary momentum in
equities, which we saw on the back of the U.S. election and
improvements in the vaccine situation, seem to be fading across
FX and equities," said Christin Tuxen, Head of FX Research at
Danske Bank.

KIWI HOVERS
Before a cautious mood spilled over from equities trade into
the currency markets, the kiwi made a fresh 20-month high versus
the U.S. dollar as traders became less convinced that negative
rates are a sure thing for New Zealand. NZD/
Bond markets moved sharply across the curve to price longer
odds on that possibility on Wednesday, and yields inched higher
on Thursday as the New Zealand currency rose to $0.6915. It had
last fallen back to trade 0.16% lower on the day at $0.6870.
"Less stimulus is required than we thought in August, but
still a substantial amount of stimulus," RBNZ Assistant Governor
Christian Hawkesby told Bloomberg in an interview.
ANZ Bank still thinks New Zealand rates will head below zero
in August 2021, but said it's now "become a bit of a toss up"
and that it is clear that going negative is no longer urgent.
Along with the virus, U.S. President Donald Trump's refusal
to concede defeat to Democrat Joe Biden in last week's election
is also beginning to jangle investors' nerves.
CBA analysts in Sydney say a 5% leap in the greenback is
possible if Trump does find a way to stay in office, most likely
by relying on electoral college delegates to cast votes for him
even if their states endorsed Joe Biden at the ballot box.

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Dollar vs. COVID cases https://tmsnrt.rs/38zp8Zj
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