FOREX-Dollar weak as improved risk appetite, EU recovery fund hopes lift euro

* Euro rises to a near 2-month high vs U.S. dollar
* Sterling rebounds from Wednesday's fall

(New throughout, updates prices, market activity, comments to
U.S. market open; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, May 28 (Reuters) - The U.S. dollar fell against
the euro for the third straight day on Thursday as the common
currency continued to bask in the glow of the recently announced
750 billion-euro ($828.90 billion)coronavirus recovery fund amid
improved risk appetite, leading investors to favor riskier
assets.
The euro was 0.49% higher against the greenback at 1.1057.
The single currency has risen 1.5% over the past three sessions.
The EU executive unveiled a plan on Wednesday to support
economies hammered by the pandemic, hoping to end months of
squabbling over how to fund a recovery. The euro's price action continues to be driven by global
risk sentiment, even as market participants remain deeply
skeptical that the EU recovery fund proposal will navigate the
bureaucracy unscathed, said Simon Harvey, FX analyst at Monex
Europe.
"We expect EURUSD volatility to remain well supported in the
coming months," Harvey said.
Overnight implied volatility gauges inched up to hit a
one-month high above 8%, suggesting investors were prepared for
unexpected moves in the common currency.
The dollar, which usually draws safe-haven flows in times of
economic uncertainty, found little support on Thursday after the
Labor Department reported another 2.1 million people filed for
unemployment benefits in the week ended May 23, down 323,000
from the prior week. "It's still an extremely large number, but if the number of
people continuing to file for unemployment benefits is
decreasing then this should be viewed as a positive for the
economy," said Chris Zaccarelli, chief investment officer at
Independent Advisor Alliance.
The U.S. Dollar Currency Index =USD , which measures the
greenback's strength against six other major currencies, was
down 0.36% at 98.555, its weakest in nearly two months.
The pound recovered partially from the previous session's
sharp drop against the dollar after Wednesday's reports that
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GRAPHIC: Euro implied vol rises https://tmsnrt.rs/2X90Z5J
GRAPHIC: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
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