FOREX-Euro retreats after early gains; Swedish crown falls after Riksbank QE expansion

* Euro/dollar hits 3-month high, before falling 0.1%
* Australian dollar slips after reaching 3-month high
* Sterling down, but close to 3-month high
* Norwegian crown falls 0.5% after reaching 3-month high vs
dollar
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Adds latest news, comment and updates prices)
By Olga Cotaga
LONDON, Nov 26 (Reuters) - The euro retreated on Thursday,
after briefly hitting a near three-month high against the
dollar, as concerns about rising coronavirus cases in Europe
grew.
The dollar had earlier been on the defensive on downbeat
U.S. economic data and optimism about coronavirus vaccines, but
later in the session riskier currencies found it hard to
maintain gains as key near-term uncertainties held back
directional trades.
Germans will face restrictions on public life for the
foreseeable future as the country tries to suppress the spread
of the coronavirus and prevent its health system becoming
overburdened, Chancellor Angela Merkel said on Thursday.
"The U.S. dollar seems to want to go lower, but does not
seem in any hurry to get there... Key support levels are looming
in a growing number of dollar pairs, and the backdrop remains
supportive for greenback sellers unless something comes along to
spook robust global risk sentiment," said John Hardy, head of FX
strategy at Saxo Bank.
The Swedish crown fell against both the euro and the dollar
after Riksbank, the Swedish central bank, expanded its
quantitative easing programme.
Pressure had mounted on the U.S. currency earlier in the
session also after Federal Reserve minutes on Wednesday
signalled the central bank is likely to strengthen its
quantitative easing programme at the next meeting in December.
Although a few Fed policymakers were hesitant to make
near-term changes to the guidance, "many participants judged
that the Committee might want to enhance its guidance for asset
purchases fairly soon". Lee Hardman, currency analyst at MUFG, estimated that the
new guidance could see the Fed commit to continue purchasing at
least $120 billion per month of securities. However, the size of
the QE programme might not necessarily be increased, Hardman
said.
Still, "the developments support our view that loose Fed
policy will remain a weight on the U.S. dollar next year."
"We are wary in the near term though that the market is
already very short U.S. dollars, which slows downward momentum
and poses the risk of short squeezes," he said.
Euro/dollar was last trading down 0.2% at $1.1895 EUR=EBS
after rising to $1.1941, its highest since Sept. 1. An index
which tracks the U.S. dollar against a basket of currencies was
up 0.1% at 92.12, though earlier it had hit a near three-month
low of 91.84 =USD
The Swedish crown was down 0.5% against the dollar at 8.5330
SEK=D3 and 0.3% against the euro at 10.1490 EURSEK=D3 .
Other Scandinavian currencies also weakened after Sweden's
central bank said it would expand and extend its asset purchase
programme to support the economy through a second wave of the
coronavirus pandemic as it kept its benchmark rate on hold at 0%
as expected. Market watchers were wondering whether the European Central
Bank will take a cue from the Riksbank and follow suit with its
own QE programme.
The ECB's chief economist warned on Thursday that tolerating
"a longer phase of even lower inflation" would hurt consumption
and investment as well as cementing expectations for low price
growth in the future. The Norwegian crown was also down 0.5% at 8.8855 against the
U.S. dollar NOK=D3 , after rising earlier to a three-month high
of 8.8160, and fell by the same extent against the euro to
10.5685 EURNOK=D3 .
The Australian dollar was down 0.1% at 0.7358 AUD=D3 ,
though earlier it rose to a near three-month high of 0.7374, and
the Canadian dollar was neutral at 1.3007 CAD=D3 against the
U.S. dollar.
Sterling fell 0.3% to $1.3344 GBP=D3 after rising to a
three-month high of $1.3399, and was also down by 0.2% against
the euro at 89.15 pence EURGBP=D3 .