FOREX-Dollar extends gains, hitting six-day high as markets turn cautious

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

LONDON, Oct 14 (Reuters) - The dollar index extended its
gains on Wednesday and demand for riskier currencies was
subdued, as investors became more cautious over rising COVID-19
cases, vaccine trials being paused and U.S. fiscal stimulus
talks hitting a new impasse.
The rally in global equities started to run out of steam on
Tuesday and investors' risk appetite suffered, with the dollar
index seeing its biggest daily jump in three weeks and
euro-dollar sliding to a six-day low.
Johnson & JNJ.N said on Tuesday it was pausing a clinical
trial of a coronavirus vaccine and Eli Lilly and Co LLY.N also
said it had paused a clinical trial of an antibody treatment.
British drugmaker AstaZeneca Plc's ANZN.L U.S. trial for a
vaccine has been on hold for over a month.
With COVID-19 cases surging in Europe, prompting renewed
restrictions on activity, FX strategists at ING said that
investors are "de-rating" European growth.
"During the first phase of de-rating in September, the
market priced out the V shaped recovery. Now, with Covid cases
rising across the board and the acknowledgement that the winter
will be long and tough, it is more about pricing the odds in the
W shape recovery, with the risk of a double dip," ING wrote in a
note to clients.
"This has been reflected in softer European and generally
cyclical currencies and the support for the dollar," ING said.
On Wednesday, most major currency pairs saw only small
moves. The dollar index was at 93.637 at 0724 GMT, up 0.1% on
the day and having exceeded the previous session's high of
93.599 =USD .
Hopes for a new coronavirus relief package in the United
Sates faded. The Senate is due to vote next week on a targeted
$500 billion aid bill of the type that Democrats have already
rejected. But analysts said markets expect a victory for Democrat Joe
Biden in the U.S. presidential elections that will result in
more fiscal stimulus.
"The assumption of Biden legislating a large fiscal stimulus
package will continue to limit fallout in the markets from the
lack of near-term fiscal stimulus," wrote MUFG strategist Derek
Halpenny.
The pound was the biggest mover in early London trading,
falling 0.3% against both dollar and euro as investors became
less hopeful a Brexit will be reached.
European Union leaders meeting on Thursday and Friday will
say that there is still not enough progress in negotiations to
seal a trade deal, according to a draft summit decision seen by
Reuters. With risk appetite subdued, investors steered clear of
riskier currencies.
The Australian dollar was flat on the day at 0.71580 versus
the U.S. dollar at 0729 GMT AUD=D3 , and the New Zealand dollar
was little changed at 0.6647 NZD=D3 .
The Norwegian crown was down around 0.2% against the dollar,
touching a six-day low of 9.27 NOK=D3 .
The euro was down 0.1% against the dollar at $1.17365,
having hit a new one-week low earlier in the session EUR=EBS .
Also in focus is euro area industrial production data is due
at 0900 GMT.
The International Monetary Fund gave a slightly improved
forecast for the hit to global growth in 2020, but lowered their
forecasts for many emerging markets.