FOREX-Dollar gains as retail trading frenzy rattles investors

* Dollar gains but moves are contained
* Euro weakens as fourth-quarter GDP data comes in
* Yuan steadies, EM currencies drop
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Tommy Wilkes
LONDON, Jan 29 (Reuters) - The dollar gained and
risk-sensitive currencies fell on Friday after an assault on
hedge-fund equity short positions in the United States rattled
investor confidence and boosted demand for safe-haven
currencies.
The moves in foreign exchange markets were measured, with
the dollar still within recent trading ranges, but the buying of
dollars underscored that concerns about the wild swings in stock
prices was felt across markets.
The dollar has benefited from safety buying since the start
of the week, when investors fretted that President Joe Biden's
fiscal spending package would not be as large as the proposed
$1.9 trillion.
COVID-19 vaccine rollouts globally have been running into
trouble, too, adding to investor jitters. Production delays have
snowballed into a spat between the European Union and drugmakers
over how best to direct the limited supplies available.
"We could see the greenback retain some momentum into the
weekend on the back of safe-haven demand: further developments
in the Robinhood story will be closely watched in this sense,"
ING said, referring to the brokerage popular with the retail
customers taking on hedge funds.
In early London trading, the dollar index -- which measures
the dollar against a basket of currencies -- rose 0.2% to 90.739
=USD . It is up half a percent for the week.
The euro dipped 0.1% to $1.2107 EUR=EBS before German
fourth-quarter GDP data due at 0900 GMT.
The dollar gained 0.4% versus the Japanese yen to 104.64
JPY=EBS .
The Swiss franc, another currency that investors often buy
when nervous, was little moved versus the euro at 1.0771
EURCHF=EBS .
Risk-sensitive currencies like the Australian dollar
AUD=D3 fell. So did most emerging-market currencies also
dropped.
The Chinese yuan strengthened to 6.4695 yuan per dollar in
offshore markets CNH=EBS .
Te People's Bank of China (PBOC) injected 100 billion yuan
into the financial system on Friday, following a week of
reducing liquidity, which had sparked concerns the central bank
was in fact tightening monetary policy. L1N2K404V
Despite the dollar's move higher this week, most analysts
are sticking to their calls it will weaken in 2021 as the new
U.S. government implements massive fiscal spending while the
Federal Reserve maintains its ultra-easy monetary policy.
"The overall trend does reflect these supply issues around
the U.S. dollar," said Michael McCarthy, chief strategist at CMC
Markets in Sydney.
"Wide expectations of that huge issuance that's coming and
the support of the Fed mean that we're looking in the
medium-term for further U.S. dollar weakness."

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