FOREX-Dollar wallows near 2 1/2-year low on vaccine, stimulus optimism

* U.S. dlr broadly weak on optimism about vaccines, stimulus
* Euro above $1.21, Aussie just under 26-month high
* Investors expect U.S. lawmakers to reach stimulus deal
eventually
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Dec 3 (Reuters) - The dollar licked wounds near 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.
Although Republicans and Democrats in U.S. Congress remained
unable 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.
The optimism helped to boost the euro despite widespread
expectations the European Central Bank will enhance its
quantitative easing next week.
The common currency fetched $1.2113 EUR= , having reached
its loftiest level since late April 2018 in the previous day's
trade.
The dollar index slipped to 2 1/2-year low of 90.987 =USD
on Wednesday and last stood at 91.040.
"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 back foot against most other
currencies, apart from the safe-haven yen, against which the
dollar held firmer at 104.46 yen JPY= .
The Australian dollar traded at $0.7418 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 6.5468 per dollar
CNH=D4 , near its 2 1/2-year high touched last month, as it
maintained its 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 $1.3370 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 Laura
Kuenssberg 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 - as they have been for
months - on fishing rights in British waters, ensuring fair
competition guarantees and ways to solve future disputes.
Bitcoin held firm at $19,215 BTC=BTSP , staying near its
record high of $19,918 hit earlier this week.