FOREX-Dollar slides to 2 1/2-year low on vaccine, stimulus optimism

* Dollar broadly weak on optimism about vaccines, stimulus
* Euro above $1.21, Aussie just under 26-month high
* Pound near 3-month high, but implied volatilities rise
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Dec 3 (Reuters) - The dollar slid to a 2-1/2-year low
against a basket of major currencies on Thursday as investors
wagered that more economic stimulus from Washington and the
expected start of COVID-19 vaccinations would support riskier
assets.
While U.S. legislators have failed to reach agreement on
fresh relief for a pandemic-hit U.S. economy, there were early
signs that a $908 billion bipartisan proposal could be gaining
traction. Investors expect lawmakers to reach a deal eventually with
the two parties also facing a Dec. 11 deadline to pass a $1.4
trillion budget or risk a shutdown of the government.
Britain on Wednesday approved a COVID-19 vaccine developed
by Pfizer PFE.N and BioNTech 22UAy.DE and said it would
start vaccinating those most at risk early next week.
"Britain is starting vaccination and the U.S. is also
expected to do so in coming weeks while coronavirus infections
appeared to have peaked in Europe and the same could be said for
the U.S. as well," said Yujiro Goto, chief strategist at Nomura
Securities.
"All of these are easing worries about the economic recovery
losing steam."
That optimism more than offset disappointing U.S. jobs
numbers for November and helped boost the euro despite
widespread expectations the European Central Bank will enhance
its quantitative easing next week. The common currency ticked up slightly to $1.2119 EUR= ,
touching its loftiest level since late April 2018.
The dollar index slipped to 2 1/2-year low of 90.948 =USD
and last stood at 90.992.
"On the whole, the new U.S. economic team under President
Biden will be dovish, if not directly pursing a weaker dollar
per se," said Daisuke Uno, chief strategist at Sumitomo Mitsui
Bank.
"The next target for the euro should be its February 2018
peak of $1.2555. When the ECB eases its policy next week as
expected, I bet the euro will gain rather than fall," he added.
The U.S. currency was on the back foot against most other
currencies, apart from the safe-haven yen, against which the
dollar held firmer at 104.47 yen JPY= .
The Australian dollar traded at $0.7409 AUD=D4 , having hit
a 26-month high in the previous session after data showed
Australia's economy rebounded more than expected in the third
quarter. The offshore Chinese yuan changed hands at 6.5478 per dollar
CNH=D4 , near its 2-1/2-year high touched last month,
maintaining strength on expectations a Biden White House would
be more conducive for China's economic growth.
The British pound held near a three-month high, last traded
flat at $1.3387 GBP=D4 after a choppy Wednesday trade as
markets looked to whether Britain and the European Union can
clinch a trade deal.
The negotiators may have enough progress to agree on a deal
in the next few days, the BBC's political editor said, giving
the pound a slight lift. The EU's chief Brexit negotiator told member states' envoys
on Wednesday negotiations were reaching "a make-or-break
moment", and they urged him not to be rushed into an
unsatisfactory agreement. Four diplomats told Reuters after a briefing by Michel
Barnier the talks remained snagged on fishing rights in British
waters, ensuring fair competition guarantees and ways to solve
future disputes.
As traders also brace for a make-or-break moment, the
pound's implied volatilities have risen. Both the overnight and
one-month volatilities GBPONO= GBP1MO= have hit one-month
highs, an indication investors expect choppy trade.
Bitcoin dipped 1.0% to $19,043 BTC=BTSP , but stayed near
its record high of $19,918 hit earlier this week.