FOREX-Euro hits one-week high as vaccine hopes lift investor spirits

* Euro, sterling gain vs weaker dollar
* Vaccine hopes trump rising cases for now
* Asian economic data boosts sentiment
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tommy Wilkes
LONDON, Nov 16 (Reuters) - The dollar dropped and the euro
and British pound gained on Monday, as investors began the week
in an upbeat mood after strong data out of Asia and on hopes for
a successful vaccine against COVID-19.
Despite fears of a resurgence of global cases of COVID-19,
investors remain hopeful a working vaccine could rescue the
global economy, helping to fuel a rally in stock markets and a
rebound in riskier currencies.
Signs that Britain and the European Union might make
progress negotiating a post-Brexit trade deal also encouraged
investors to take on more risk.
Against a basket of currencies, the dollar softened 0.2% to
92.573 =USD .
The euro rose 0.3% to a one-week high of $1.1868 EUR=EBS
while currencies sensitive to global sentiment such as the
Australian dollar notched up solid gains AUD=D3 .
Commerzbank analysts said investor confidence that the euro
region was better prepared to launch more fiscal stimulus than a
divided U.S. Congress was also helping.
"In particular as the positive news about vaccine developers
are providing a glimmer of hope at the end of the corona tunnel
the FX market is likely to prefer an active fiscal reaction over
inactivity," said Commerzbank strategist Ulrich Leuchtmann.
"If the end of the pandemic is foreseeable the tactic of
pushing the European economies over lockdown with the help of
fiscal policies makes sense again to FX traders."
Sterling rallied to as high as $1.3242 GBP=D3 before
settling at $1.3219, up 0.1%. Against the euro the pound was
down marginally at 89.75 pence EURGBP=D3 .
Hopes for a compromise in talks between London and Brussels
over a trade deal for after their Brexit transition period were
given a boost after Dominic Cummings, the most powerful adviser
to Prime Minister Boris Johnson and a eurosceptic, left Downing
Street.
Britain's Brexit negotiator David Frost said on Sunday that
the two sides had made some progress in their negotiations but
might not succeed in getting an agreement. "This topic remains an uncertain catalyst... The market
needs to be cautious that prices could fluctuate nervously on
news," said Sumino Kamei, senior analyst at MUFG Bank.
Adding to investor optimism was data on Monday showing signs
of economic recovery in China and Japan, the world's second and
third largest economies. China's industrial output rose by a
faster-than-expected 6.9% in October, while Japan's economy grew
at its fastest pace on record in the third quarter.
The Chinese yuan firmed 0.4% in offshore markets to a
one-week high of 6.5663 yuan per dollar CNH=EBS .
Analysts also said the China-backed Regional Comprehensive
Economic Partnership deal signed by 15 Asia-Pacific economies on
Sunday had boosted sentiment.