* Euro 0.1% lower to dollar
* Sterling jumps to highest since May 2020 vs. euro
* Commodity currencies - Aussie, Kiwi, Norwegian crown all
up
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Ritvik Carvalho
LONDON, Jan 20 (Reuters) - The euro struggled to join a
broader risk rally against the dollar on Wednesday as analysts
said the risk of extended lockdowns in Europe to combat the
spread of COVID-19 and the continent's lag in a vaccine rollout
were weighing on the currency.
Down 0.1% against the dollar at $1.2117 by 1130 GMT
EUR=EBS , Europe's shared currency had only the safe-haven
Swiss franc CHF= and Sweden's crown for company in resisting a
broad rally against the greenback by the G-10 group of
currencies.
"We're getting more headlines that the current lockdowns
will be extended further, which could mean that the euro zone
would be flirting with a double-dip recession before long," said
Valentin Marinov, head of G10 FX research at Credit Agricole,
noting Europe's lag in rolling out a coronavirus vaccine
compared to the United States and Britain.
"So all of that plays into the story that tomorrow's ECB
meeting, while uneventful in terms of policy announcements,
could convey a relatively dovish message to the market. On top
of that, President Lagarde could once again jawbone the euro, so
the euro is kind of lagging behind."
Marinov also noted price action in the pound, which hit
$1.3720 GBP=D3 - a 2-1/2-year high - and 88.38 pence
EURGBP=D3 - its highest since May 2020 against the euro - as a
contributing factor to euro weakness. GBP/
There was also focus on a story by Bloomberg News, which
reported the European Central Bank was conducting its bond
purchases with specific yield spreads in mind, a strategy that
would be reminiscent of yield curve control.
Elsewhere, the risk-sensitive Australian dollar gained 0.4%
to $0.7727 AUD=D4 . The New Zealand dollar, also a commodity
currency like the Aussie, gained 0.25% to $0.7133 NZD=D4 .
DOLLAR WEAKNESS
While the world will be watching Joe Biden's inauguration as
U.S. president at noon in Washington (1700 GMT), traders were
more focused on his policies than the ceremony.
U.S. Treasury Secretary nominee Janet Yellen urged lawmakers
at her confirmation hearing to "act big" on stimulus spending
and said she believes in market-determined exchange rates,
without expressing a view on the dollar's direction.
The index that measures the dollar's strength against a
basket of peers was up almost 0.1% at 90.510 =USD . The euro
forms nearly 60% of the dollar index by weight.
It also fell 0.1% against the Japanese yen to 103.81 yen per
dollar. JPY=EBS
While the dollar has perked up in recent weeks on the back
of a rise in U.S. Treasury yields, investors still expect the
currency to weaken.
"We remain bearish U.S. dollar, and expect the downtrend to
resume as U.S. real yields top out," said Ebrahim Rahbari, FX
strategist at CitiFX.
"Continued Fed dovishness remains important for our view, in
addition to global recovery, so we'll watch upcoming Fed-speak
closely."
Positioning data shows investors are overwhelmingly short
dollars as they figure that budget and current account deficits
will weigh on the greenback. 0#NETUSDFX=
UBS Global Wealth Management's chief investment officer Mark
Haefele reiterated a bearish view on the dollar, saying that
pro-cyclical currencies such as the euro, commodity-producer
currencies, and the pound would benefit "from a broadening
economic recovery supported by vaccine rollouts".
The cryptocurrency Bitcoin fell 4%, trading at $34,468.
BTC=BTSP
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World FX rates https://tmsnrt.rs/2RBWI5E
Dollar positioning https://tmsnrt.rs/35VsqEj
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