FOREX-Dollar nears 3-week highs on Fed comments as data eyed

* Graphic on world forex rates:http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, May 14 (Reuters) - The dollar strengthened towards a
three-week high on Thursday as stock markets weakened broadly
after Federal Reserve Chairman Jerome Powell dismissed
speculation about negative interest rates.
European stock markets were down more than 1% while U.S.
stock futures indicated a negative start for Wall Street,
pointing to a third consecutive session of losses and sending
investors to the relative safety of the greenback.
Comments from U.S. President Donald Trump also lifted the
dollar. Trump said he supported a strong dollar, a day Jerome
Powell rejected the idea of using negative interest rates.

Though Powell is the latest in a parade of policymakers to
brush off the notion that rates may enter negative territory,
Fed futures 0#FF: were pricing a small chance of sub-zero U.S.
rates by March next year. Powell also said the recovery could take some time as he
warned of a recession worse than any since World War Two.

"His words were a blow to the optimism that had been
building in the markets over the last few weeks as the
relaxation of social distancing restrictions had generated
expectations of a V-shaped recovery from the virus crisis," said
Raffi Boyadjian, senior investment analyst at XM.
Against a basket of its rivals =USD , the dollar edged 0.2%
higher to 100.37, hovering below a three-week high of 100.44
tested earlier this week.
While the Fed chairman also urged more fiscal stimulus to
support the economy, Mark Haefele, chief investment officer at
UBS Global Wealth Management said the ongoing tensions between
Republicans and Democrats suggested additional stimulus is
"unlikely to immediately materialize".
Among major currencies, the Australian dollar led losers
after data showed the country shed jobs in April at the fastest
pace on record, suggesting more monetary and fiscal easing may
be needed to support the economy.
The Aussie AUD=D3 fell 0.3% to $0.6437 after data showed
unemployment increased by 594,300 in April, slightly more than
the median estimate. The jobless rate rose to a five-year high.
The pound GBP=D3 also tumbled below the $1.22 line for the
first time in more than five weeks after Wednesday's data showed
Britain's economy shrank by a record 5.8% in March as the
coronavirus crisis escalated. Investors are now focused on data from the United States and
Europe in the next two days for more clues on the depth of the
downturns there. U.S. initial jobless claims data is due on
Thursday while the eurozone reports first-quarter GDP data on
Friday.