FOREX-Euro steady as doubts over EU recovery fund arise

* Dollar holds its ground as conflicting forces emerge
* Swiss franc long positions highest since 2016
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds chart, updates prices)
By Olga Cotaga
LONDON, May 28 (Reuters) - The euro was steady on Thursday
as investors questioned whether a 750 billion euro ($826.35
billion) European Union plan to prop up the bloc's
coronavirus-hit economies would be delivered.
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 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 that exposed faultlines
across the 27-nation bloc.
Under the proposal, the EU Commission will disburse
two-thirds of the funds in grants and the rest in loans to
cushion the unprecedented slump expected this year.
The 500 billion euros in grants reflects the wishes of the
two biggest EU economies, France and Germany, which came up with
a grants-only proposal last week. "In the event that we actually see the European Commission
adopt a proposal in similar nature or stature of the
France-Germany proposal, we do think that would be positive for
the euro," said Parisha Saimbi, G10 FX strategist at BNP
Paribas.
"We would expect to see euro/dollar head higher, and in
particularly euro/Swiss head higher especially given the long
positioning in Swiss (franc) has built up quite significantly
and as a result you could see an exacerbated move to the upside
as positions are covered," she said.
French Finance Minister Bruno Le Maire told France 2
television on Thursday that he hoped the European Union could
reach a deal on the package in the coming weeks. The euro was last flat at $1.1010 EUR=EBS , having risen
earlier to a two-month high of $1.1035. The euro was up 0.1%
versus the Swiss franc at 1.0670 EURCHF=EBS , though the day
prior it rose to nearly a three-month high.
Leveraged hedge funds held $1.14 billion in Swiss franc long
positions in the week to May 19, CFTC data shows, a near
four-year high.
An index tracking the U.S. dollar against major currencies
was stable =USD at 98.93 as the greenback held its own in a
crosscurrent between rising Sino-U.S. tensions and optimism over
recovering global growth as economies re-open.
The war of words between the world's two biggest economies
escalated, with Hong Kong the newest flashpoint, with U.S.
Secretary of State Mike Pompeo saying on Wednesday that China's
plan to impose laws there was "only the latest in a series of
actions that fundamentally undermine" the former British
colony's autonomy and freedoms.
The United States is currently crafting a range of options
to punish China over its tightening grip on Hong Kong, including
sanctions, tariffs and restrictions on Chinese companies,
according to people familiar with the discussions. The yuan was neutral at 7.1751 in the offshore market
CNH=EBS , though it remained close to the 7.1965 record low it
sank to the day before.1 = 0.9076 euros)

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Euro implied vol rises https://tmsnrt.rs/2X90Z5J
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>