FOREX-Dollar halts slide as Mnuchin calls time on emergency funds

* Dollar stops slide after Mnuchin move surprises some
investors
* Fed's backstop for companies and municipalities to expire
* Markets still expect accommodative policy environment
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Nov 20 (Reuters) - The dollar halted its slide on
Friday after U.S. Treasury Secretary Steven Mnuchin called an
end to some of the Federal Reserve's pandemic lending, derailing
a risk rally and surprising investors who had counted on central
bank support.
The announcement damped a previously positive mood after
reports that U.S. Senate Republican and Democrat leaders had
agreed to resume negotiations on another coronavirus stimulus
package. While Mnuchin's move was aimed at re-appropriating some $455
billion allocated to Treasury under the CARES Act in the spring
for other spending, some investors were concerned about ending
programmes that they think have played a vital role in
reassuring markets. The Fed also said it "would prefer that the full suite of
emergency facilities established during the pandemic continue to
serve their important role as a backstop," a rare open
confrontation with the government.
"Investors have banked on the MLF (Municipal Liquidity
Facility) being a reliable, emergency lender to our (municipal
bond) market's core borrowers. It has taken the idea of a
payment default or catastrophic budget problem off the table,"
said Matt Fabian, partner at Municipal Market Analytics at
Westport, Connecticut, in the United States.
"Without the MLF, the market won't collapse, but it will
lack some resilience if its tested by a selloff or more
pronounced credit fears."
Also souring risk appetite, California ordered a curfew
placed on all indoor social gatherings and non-essential
activities outside the home across most of the state in a major
escalation of measures to curb an alarming surge in coronavirus
infection.
For over a week, the dollar has lost ground against riskier
currencies due to coronavirus vaccine breakthroughs and hopes of
reduced political uncertainty after the U.S. election.
The dollar index stood at 92.306 =USD , off Thursday's low
of 92.236, though it is still down 0.3% on the week.
The euro fetched $1.1874 EUR= , flat on the day but not far
from this week's high of $1.18935 touched on Tuesday and up 0.3%
on week.
The yen stood at 103.80 per dollar JPY= , retaining its
weekly gain of 0.8%.
The reaction in currency markets, however, has been limited
compared with the U.S. stocks and bond markets.
"There is a feeling that, at the end of the day, financial
markets will remain solid and detached from the troubles in the
real economy. A correction in stock prices was natural given
their recent gains," said Tatsuya Chiba, manager of forex at
Mitsubishi UFJ Trust Bank.
"For now we have to see whether stocks markets' retreat will
prove to be a temporary one," he said.
The British pound was on the defensive after the Times
newspaper reported that European leaders will urge the European
Commission to publish no-deal Brexit plans as the year-end
deadline approaches. The currency changed hands at $1.3258 GBP=D4 . Against the
euro, it stood at 0.8955 pound per euro EURGBP=D4 , wiping its
gains made over the past two days.
Outside the dollar index basket currencies, the Australian
dollar, which is sensitive to economic sentiment, stood little
changed at $0.7284 AUD=D4 , having erased most of its gains
this week.
The offshore Chinese yuan was flat at 6.5716 to the dollar
CNH=D4 after hitting a 2 1/2-year high of 6.5318 on Wednesday.
The Turkish lira held firm following a 2.3% jump on Thursday
after the central bank, under new governor Naci Agbal, delivered
a big rate hike as expected and pledged to remain tough on
inflation. The lira changed hands at 7.5450 to the dollar TRYTOM=D4 ,
near its highest level in almost two months. The lira is the
best performing currency so far this month.
Elsewhere, bitcoin retained its bullish tone, trading at
$17,971 BTC=BTSP , near a three-year high touched on Wednesday.