FOREX-Dollar extends gains, commodity currencies slump, euro falls ahead of ECB meeting

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

(Updates prices, adds comment and latest market moves)
By Elizabeth Howcroft
LONDON, Oct 29 (Reuters) - The dollar extended its gains on
Thursday and commodity currencies took a hit from lower oil
prices, with markets worried about Europe's second wave of
coronavirus infections, while the euro fell before the European
Central Bank meeting.
Rapidly rising COVID-19 infection rates in Europe, along
with caution ahead of the U.S. elections, triggered the worst
market sell-off since June earlier this week. France and Germany ordered their countries back into
lockdown, after Europe's death rate jumped 37% last week.
"The safe haven currencies of the US dollar, yen and Swiss
franc have been boosted by building fears over the darkening
outlook for global growth," MUFG currency analyst Lee Hardman
said in a note to clients.
But even as equity markets recovered, currency markets
showed signs of investor caution. Implied volatility gauges with a one-week maturity for
currency pairs such as euro-dollar and dollar-yen, rose to their
highest in more than six months on Wednesday, and remained
elevated on Thursday. The dollar extended its gains, hitting a 10-day high of
93.674 at 1134 GMT =USD .
"The dollar looks like it's starting to trade independently
of risk appetite and more on the U.S. election story," said
Stephen Gallo, European head of FX strategy at BMO Capital
Markets. The European Central Bank's policy announcement is due at
1245 GMT, followed by a news conference at 1330 GMT.
The central bank is expected to hold off with new stimulus
measures this week but is likely to signal more action in
December.
"Compared to the September meeting, the focus will not be so
much on the ECB comments on the exchange rate," wrote ING's
chief EMEA FX and IR strategist, Petr Krpata.
"Instead all eyes will be on hints at further easing, likely
via the additional bond purchases," he said.
Krpata said the euro has been resilient despite the
euro-specific negative news such as the second wave in Europe,
downgrades to euro zone growth outlook and market expectations
of further easing in December.
The euro was down 0.3% on the day at $1.171 at 1146 GMT
EUR=EBS .
"It looks like there's a bit more demand for euro downside
in the options market, on the one-month duration," BMO's Stephen
Gallo said.
Against the yen, the euro fell to new three-month lows, down
0.5% on the day at 122 yen at 1150 GMT EURJPY=EBS .
The yen was broadly steady against the dollar at 104.195
JPY=EBS after the Bank of Japan trimmed its economic growth
and inflation forecasts but, as expected, made no changes to its
monetary policy. The riskier Australian and New Zealand dollars both extended
the previous session's losses versus the U.S. dollar AUD=D3
NZD=D3 .
Commodity currencies took a hit as oil prices fell. The
Norwegian crown hit one-month lows versus both the dollar and
euro NOK=D3 EURNOK=D3 . The Russian rouble also came under
pressure, touching its lowest versus the euro since early 2016
EURRUBTN=MCX . China's offshore yuan was up 0.2% on the day at 6.7162 to
the dollar at 1152 GMT CNH=EBS .
China's major state-owned banks have been swapping U.S.
dollars for yuan this week, traders said on Thursday, suggesting
monetary authorities were trying to rein in the currency.
The onshore yuan has appreciated 7% against the dollar since
the depths it hit in May CNH=CFXS .