* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Hideyuki Sano
TOKYO, Jan 25 (Reuters) - The dollar held ground against
riskier currencies on Monday as weak economic data from Europe
and fresh worries about the coronavirus supported investor
demand for safe-havens, stretching greenback selling positions.
Economic activity in the euro zone shrank markedly in
January as stringent lockdowns to contain the coronavirus
pandemic hit the bloc's dominant service industry hard while UK
data showed British retailers struggled to recover in December.
British Prime Minister Boris Johnson also said on Friday
there was evidence a new variant of COVID-19 discovered late
last year could be associated with higher mortality.
The news came as bets against the dollar have become
overcrowded, analysts said, with U.S. data on Friday showing net
dollar short positions swelling to the largest since May 2011.
The dollar index stood at 90.247 =USD , flat on the day but
off last week's low of 90.043 set on Thursday.
The euro was also little changed at $1.2163 EUR= , taking a
pause after a 0.8% gain last week. The common currency is capped
in part by signs of political instability in Rome.
Italian bond yields rose with spreads over German Bunds
hitting their highest since November amid a political impasse
for Prime Minister Giuseppe Conte who has so far failed to drum
up a ruling majority in Italy's
parliament. Conte appealed to centrist and unaligned upper house
lawmakers outside the coalition to join his minority
government's ranks but few have responded.
"Given Conte won a confidence vote, a dissolution of the
parliament and a general election is unlikely," said Makoto
Noji, chief currency strategist at SMBC Nikko Securities.
Nonetheless, Italy's case demonstrates the widespread risks
of political instability from popular discontent as communities
grow weary of the pandemic.
"The stock markets' rally during this pandemic is completely
dependent on fiscal expansion and debt monetisation by central
banks," Noji said. "Political instability could delay fiscal
measures."
In Washington, the honeymoon after Joe Biden's inauguration
as President last week means investors are hopeful that at least
a part of his $1.9 trillion coronavirus relief plan will come
through fairly soon. But Biden will likely need bipartisan support to push his
agenda as Democratic Party narrowly controls Congress while the
second impeachment trial of former U.S. President Donald Trump
expected early next month could complicate his efforts.
Against this backdrop, the Federal Reserve is expected to
maintain its strong commitment to accommodative monetary policy
when it holds its first policy meeting later this week.
Elsewhere, the British pound held firm at $1.3684 GBP=D4 ,
not far off a 2-1/2-year high of $1.3745 touched on Thursday
thanks in part to Britain's lead in COVID-19 vaccinations.
The dollar traded flat at 103.80 yen JPY= .
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates https://tmsnrt.rs/2RBWI5E
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>