FOREX-Dollar index holds near 3-week lows; yuan drops

* Dollar index near three-week lows
* China's yuan drops after central bank lowers reserve requirement
* Pound strengthens after lockdown measures announced
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Adds details, updates prices; previous LONDON)
By Chuck Mikolajczak
New York, Oct 12 (Reuters) - The dollar index held near three-week lows on Monday as optimism over the
possibility of a COVID-19 relief bill was curbed by concern over the pandemic while China's yuan fell
after the People's Bank of China (PBOC) changed its reserve requirements policy.
On Sunday, the Trump administration called on Congress to pass a stripped-down coronavirus relief bill
using leftover funds from an expired small-business loan program, as negotiations on a broader package
continue to run into roadblocks. The greenback has held within a range of about 2% over the past three weeks as talks have gone back
and forth. The dollar had its biggest loss in six weeks on Friday amid rising hopes a fiscal stimulus
package would be agreed to stem the economic fallout from COVID-19. More stimulus is seen as
negative for the dollar.
"The chances of getting a comprehensive stimulus deal before the election are slim," said Edward Moya,
senior market analyst, at OANDA in New York.
"So what that means is that the damage to the economy is going to grow and it means that right now we
are talking somewhere around $1.8 or $2 trillion ...and that just means the stimulus is going to be bigger
the longer they wait."
The offshore yuan CNHUSD=R fell 0.8% against the dollar after China's central bank said on Saturday
it would lower the reserve requirement ratio for financial institutions when conducting some foreign
exchange forwards trading, a move seen as a bid to curb recent yuan appreciation. The yuan had reached a more than 17-month high on Friday in offshore trade and has gained nearly 8%
against the dollar since late May. But on Monday the offshore yuan was on track for its biggest daily
decline against the dollar since March.
The PBOC's move to end the requirement for banks to set aside cash to cover yuan forward transactions
would make it easier to short the yuan, said RBC's head of Asia FX, Alvin Tan.
The move was also cited by analysts as a reason for weakness in the China-sensitive Australian dollar,
which was down about 0.4%.
The dollar index =USD fell 0.1%.
The euro EUR=EBS was down 0.15% to $1.1814. In Europe, the World Health Organization has urged
governments to restrict activity to combat a rapid rise in COVID-19 infections. The Japanese yen JPY=EBS weakened 0.31% versus the greenback at 105.28 per dollar after Bank of
Japan Governor Haruhiko Kuroda stressed his readiness to take additional monetary easing steps.
The pound held above $1.30, strengthening after Prime Minister Boris Johnson set out on Monday a
three-tier system of local lockdown measures in England GBP=D3 . Sterling GBP=D3 was last trading at
$1.3069, up 0.18% on the day. ========================================================
Currency bid prices at 11:10AM (1510 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.1814 $1.1832 -0.15% +5.38% +1.1827 +1.1787
Dollar/Yen JPY=D3 105.2750 105.6300 -0.36% -3.09% +105.6900 +105.2550
Euro/Yen EURJPY= 124.36 124.92 -0.45% +1.98% +124.9600 +124.3300
Dollar/Swiss CHF=EBS 0.9088 0.9096 -0.08% -6.08% +0.9123 +0.9088
Sterling/Dollar GBP=D3 1.3068 1.3045 +0.18% -1.46% +1.3072 +1.3006
Dollar/Canadian CAD=D3 1.3103 1.3115 -0.09% +0.86% +1.3142 +1.3102
Aussie/Dollar AUD=D3 0.7212 0.7243 -0.41% +2.80% +0.7235 +0.7205
Euro/Swiss EURCHF= 1.0735 1.0760 -0.23% -1.08% +1.0774 +1.0735
Euro/Sterling EURGBP= 0.9038 0.9062 -0.26% +6.91% +0.9079 +0.9038
NZ NZD=D3 0.6647 0.6671 -0.34% -1.20% +0.6670 +0.6644
Dollar/Dollar
Dollar/Norway NOK=D3 9.1375 9.1285 +0.25% +4.32% +9.1630 +9.1245
Euro/Norway EURNOK= 10.7964 10.8100 -0.13% +9.74% +10.8240 +10.7760
Dollar/Sweden SEK= 8.7933 8.7792 -0.07% -5.93% +8.8231 +8.7856
Euro/Sweden EURSEK= 10.3871 10.3945 -0.07% -0.77% +10.4127 +10.3820