* Dollar index slips; Aussie and Kiwi gain
* Euro-dollar steady
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
LONDON, Jan 25 (Reuters) - A rebound in global market
sentiment put new momentum behind the dollar decline on Monday,
while riskier currencies strengthened, as optimism about U.S.
President Joe Biden's stimulus plans took precedence over the
impact of COVID-19.
Market sentiment had turned more cautious at the end of last
week as European economic data showed that lockdown restrictions
to limit the spread of the virus hurt business activity,
dragging stocks lower. The mood picked up on Monday, however, lessening demand for
the safe-haven U.S. dollar. The dollar index fell overnight and
was down 0.2% at 90.094 at 0758 GMT =USD .
Analysts expect a broad dollar decline during 2021. The net
speculative short position on the dollar grew to its largest in
ten years in the week to Jan. 19, according to weekly futures
data from CFTC released on Friday. The U.S. Federal Reserve meets on Wednesday and Fed Chair
Jerome Powell is expected to signal that he has no plans to wind
back the Fed's massive stimulus any time soon - news which could
push the dollar down further.
"The process of tapering QE is likely to be a gradual
process which could last throughout 2022, and then potentially
be followed by the first rate hikes later in 2023," wrote MUFG
currency analyst Lee Hardman.
"In these circumstances, we continue to believe that it is
premature to expect the US dollar to rebound now in anticipation
of policy tightening ahead, and still see scope for further
weakness this year," he said.
In a phone call on Sunday with Republican and Democrat
lawmakers, officials in President Biden's administration tried
to head off Republican concerns that the $1.9 trillion stimulus
proposal -- hopes for which have lifted market sentiment since
the U.S. elections last year -- was too expensive.
RELIEF MEASURE
Lawmakers from both parties said they had agreed that
getting the COVID-19 vaccine to Americans should be a priority,
but some Republicans objected to such a hefty package only a
month after Congress passed a $900 billion relief measure.
The euro was flat against the dollar, at $1.2174. At the
European Central Bank meeting last week, President Christine
Lagarde said the bank was closely watching the euro. The euro
surged 9% last year versus the dollar and reached new two and a
half year highs earlier in January.
But despite this verbal intervention, traders remain bullish
on the euro, expecting the bar for a rate cut to be high.
Ulrich Leuchtmann, head of FX and commodity research at
Commerzbank, wrote in a note to clients that in the short term
the threshold for a rate cut is high and in the long term more
than one or two cuts would be impossible.
"Things are more complicated medium-term," he said. "Even if
the ECB does not want to cut interest rates: if the euro were to
become so strong, we cannot be certain that it might not tweak
interest rates after all."
Elsewhere, the Australian dollar, which is seen as a liquid
proxy for risk, was up 0.2% at 0.773 versus the U.S. dollar at
0822 GMT.
Australia approved the Pfizer-BioNTech COVID-19 vaccine for
use but warned AstraZeneca's international production problems
mean the country would need to distribute a locally manufactured
shot earlier than planned. The New Zealand dollar was up 0.4% NZD=D3 , while the
commodity-driven Norwegian crown was up 0.3% versus both dollar
and euro NOK=D3 EURNOK=D3 .
The safe-haven Japanese yen was flat on the day at 103.735
versus the U.S. dollar JPY=EBS .
The Swiss franc lost out slightly versus the euro, with the
pair changing hands at 1.0786 at 0829 GMT EURCHF=EBS .
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World FX rates https://tmsnrt.rs/2RBWI5E
USD https://tmsnrt.rs/3a0DdOD
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