FOREX-Dollar nears 2 1/2-year lows as vaccine optimism grows

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Saikat Chatterjee
LONDON, Dec 9 (Reuters) - The U.S. dollar fell towards a
two-and-a-half-year low on Wednesday as progress in combating
the COVID-19 pandemic boosted risk appetite and prospects of
more U.S. fiscal stimulus weakened the U.S. currency.
Riskier currencies, including the Australian dollar AUD=D3
and the Chinese yuan CNH=D3 , led gains against the dollar in
London trading after three days of gains.
With U.S. coronavirus cases exceeding 15 million on Tuesday,
regulators moved a step closer to approving a COVID-19 vaccine,
while Britain started inoculating people on Tuesday.
Investors are also tracking negotiations over U.S.
coronavirus aid, with the Trump administration proposing a $916
billion package on Tuesday after congressional Democrats
rejected a slimmer plan. "There hasn't been any real breakthrough in the stimulus
talks, but it does appear that both sides are prepared to pour
water in their wine and soften their demands," said Marios
Hadjikyriacos, an investment analyst at XM.
Against a basket of currencies =USD , the dollar fell 0.2%
to 90.70. It reached an April 2018 low of 90.47 last Friday.
The dollar's losses have been most severe versus the euro in
recent weeks as economic activity data suggest Europe is
outperforming the United States in recent weeks.
The dollar weakened 0.2% against the euro EUR=EBS to
$1.2126 and is heading for an annual loss of 8% against the
common currency, its largest since 2017.
German investor sentiment rose in December on expectations
that vaccines against the coronavirus will boost the economic
outlook, a survey showed this week. YUAN
The dollar dropped to 6.5198 yuan in onshore trading
CNY=CXS , its lowest since June 2018, putting the yuan up by
more than 10% from its May lows, boosted by the softer dollar
and steady inflows into Chinese stocks and bonds. CNY/
Sterling was volatile in trading GBP=D3 , up 0.7% at
$1.3451 before a Wednesday dinner between British Prime Minister
Boris Johnson and European Commission President Ursula von der
Leyen in Brussels that is seen as a last-ditch attempt to
salvage a Brexit trade deal. Rumblings in the money markets grew with swap markets
indicating a growing demand for dollars heading into the end of
the year. Three-month euro cross-currency basis swap spreads
EURCBS3M=ICAP widened to minus 32 bps, well below a March peak
of nearly minus 90 bps.

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