* Dollar index up 0.2% as Biden offers $1.9 trillion
stimulus
* COVID-19 infections rise in China
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
(Updates prices, adds commentary, adds detail about dollar)
By Elizabeth Howcroft
LONDON, Jan 15 (Reuters) - Currency markets turned
risk-averse on Friday, with the dollar on track for its biggest
weekly gain since November 2020 and analysts predicting further
short-term strength as rising coronavirus infections limit risk
appetite.
The dollar index's rebound from three-year lows began last
week. It picked up as European markets opened on Friday, having
slowed overnight after U.S. Federal Reserve Chair Jerome Powell
said "now is not the time" to be talking about changing the
Fed's asset purchases. President-elect Biden laid out his $1.9 trillion stimulus
package proposal on Thursday, but analysts said that the market
impact was limited by uncertainty over how easily Democrats will
be able to get their proposals through the Senate. "The reality is that while the Democrats now have increased
power having won the run-off elections in Georgia last week,
that power still has its limits," MUFG currency strategist Derek
Halpenny wrote in a note to clients.
"While short-term, the U.S. dollar could extend further, the
big-picture backdrop for the dollar remains negative," he added.
At 1141 GMT, the dollar index was at 90.407 versus a basket
of currencies, up 0.2% on the day =USD . It was set for a
weekly gain of around 0.4%, making this its strongest week since
November.
Against a stronger dollar, the euro was down 0.2% at
$1.21325. EUR=EBS
Rising coronavirus infections also curbed risk appetite, as
daily cases in China hit their highest in more than 10 months.
France will tighten its COVID-19 border controls and bring
its curfew forward by two hours, while German Chancellor Angela
Merkel said she wanted "very fast action" to counter the spread
of virus variants after Germany had a record number of deaths.
"Rising new cases globally have induced headwinds to the
short-term economic recovery," said Simon Harvey, senior FX
analyst at Monex Europe.
"It's a bit more favourable at the moment in the U.S..
There's rising case counts, but not necessarily nationwide
restrictions being rolled out," he said, adding he expected the
dollar to be supported while other major economies are subject
to tighter lockdown measures.
The outgoing Trump administration ramped up tensions with
China, imposing sanctions on Chinese officials and companies,
including an investment ban on nine additional companies - moves
China said it opposes. The Australian dollar - seen as a liquid proxy for risk -
was down around 0.6% at 0.7736 versus the U.S. dollar at 1147
GMT AUD=D3 . The New Zealand dollar was also down around 0.6%
on the day NZD=D3 .
The dollar rose around 0.2% against China's offshore yuan,
with the pair changing hands at 6.476 at 1148 GMT CNH=EBS .
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates https://tmsnrt.rs/2RBWI5E
dollar https://tmsnrt.rs/3qnLbrw
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>