FOREX-Dollar softens as Asian stock rally saps safe-haven demand

* Retail investors that targeted hedge funds now focused on
silver
* Analysts say risk sentiment to drive dollar in near term
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Kevin Buckland
TOKYO, Feb 1 (Reuters) - The safe-haven dollar faltered on
Monday as risk sentiment improved, on hopes that retail
investors who targeted hedge funds last week had turned their
sights elsewhere.
The U.S. currency declined against most of its peers as
Asian stocks rallied following four days of losses. The riskier Australian dollar advanced, as did the British
pound.
Earlier, the greenback had found support as traders remained
wary that retail investors who had organised online might
continue their assault on hedge fund short positions, sparking
more volatility, but the crowd's focus appeared to have shifted
squarely to silver. Some worry that the wild swings in GameStop and other stocks
may foreshadow a market correction. "We need to see where equities stabilise, and if this is a
short-term blip in equity markets or if it's going to have
further downside," said Shinichiro Kadota, senior currency
strategist at Barclays Capital in Tokyo.
"Risk sentiment is driving the dollar now."
Wrangling over the size of President Joe Biden's fiscal
stimulus package and delays to vaccine rollouts also provided
reasons for caution. A group of Republican senators are urging Biden, a Democrat,
to significantly downsize his proposed $1.9 trillion pandemic
relief package, and have floated a $600 billion alternative.
The dollar index =USD slipped 0.1% to 90.534 on Monday in
Asia, following a gain of about half a percent last week.
The gauge has been largely range-bound in recent weeks,
after bouncing from a nearly three-year low of 89.206 at the
start of the year.
Investors are trying to evaluate whether an almost 7%
selloff in 2020 -- driven by expectations of a global pandemic
recovery amid massive fiscal spending and continued ultra-easy
monetary policy -- is likely to continue.
"The U.S. dollar downtrend has been arrested for the time
being," said Ray Attrill, head of forex strategy at National
Australia Bank in Sydney.
"But what happens in the next one day to one week to one
month is probably in the hands of risk sentiment."
The Aussie dollar added 0.2% to 76.57 U.S. cents, reversing
an earlier loss on new signs of weakness in the recovery in
China, a key customer for Australian commodities.
Data from the weekend showed China's factory recovery slowed
in January, hobbled by a wave of coronavirus infections.
Sterling GBP= jumped 0.4% to $1.3739, approaching the 2-
1/2-year high of $1.3759 reached last week.
The euro EUR=EBS weakened 0.1% to $1.2185, as it continued
to fluctuate in a narrow range.
The dollar slipped 0.1% to 104.655 yen JPY=EBS , further
retreating from the 2-1/2-month high of 104.94 touched on
Friday.

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World FX rates https://tmsnrt.rs/2RBWI5E
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(Editing by Shri Navaratnam and Jacqueline Wong)