FOREX-Dollar on course for worst month in decade as U.S. recovery loses steam

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, July 31 (Reuters) - The dollar slipped to two-year
lows on Friday and is on track to post its biggest monthly
decline in 10 years, as investors worried that a recovery in the
U.S. economy could be stymied by a second wave of coronavirus.
Confidence in the U.S. currency was undermined further after
U.S. President Donald Trump raised the possibility of delaying
the nation's November presidential election.
The dollar index fell to 92.777 =USD , and is on course to
post its biggest monthly fall in 10 years.
"At the root of the dollar's weakness is the fact, which was
highlighted by Fed Chairman (Jerome) Powell the other day, that
U.S. coronavirus cases started to increase in mid-June, curbing
consumption and sending the economy downhill," said Daisuke Uno,
chief strategist at Sumitomo Mitsui Bank.
The U.S. Labor Department data showed initial claims for
unemployment benefits increased 12,000 to a seasonally adjusted
1.434 million in the week ending July 25, a sign that recovery
in the employment market is stalling. That poured cold water on hopes of recovery after a
devastating recession in the previous quarter. Data on Thursday
showed that the U.S. economy contracted by 32.9% in the second
quarter, the steepest pace since the Great Depression.
The U.S. Congress was no closer to a deal extending or
replacing the extra $600-per-week in payments to tens of
millions thrown out of work by the coronavirus pandemic, just
one day before a federal jobless benefit was set to expire.

Adding salt to the dollar's injury, Trump raised the idea of
delaying the Nov. 3 U.S. elections, although it was immediately
rejected by both Democrats and his fellow Republicans in
Congress - the sole branch of government with the authority to
make such a change. "The mere suggestion by Trump of a delay does play to
concerns that the election result will be challenged in November
(should Trump lose), and that, because of the likely larger than
usual share of votes via mail in ballots due to the pandemic, we
might not now (get) the result on election night itself," wrote
Ray Attrill, Head of FX Strategy at National Australia Bank in
Sydney.
Leading the charge against the dollar was the euro, which
has gained traction after European Union leaders agreed this
month to a 750 billion euro economic recovery fund, taking on
debt jointly in a major boost to regional cooperation.
The euro hit a two-year high of $1.1889 and last traded at
$1.1869 EUR= , having gained 5.7% so far in July, also the
biggest gain in a decade.
Against the yen, the dollar hit a 4 1/2-month low of 104.52
yen and last stood at 104.54 JPY= , having lost 3.1% this
month.
Likewise the British pound stood at $1.3119 GBP=D4 after
hitting a 4 1/2-month high of $1.3136.