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FOREX-Dollar clings to 8-week highs on recovery worries amid COVID resurgence
Published at 23/09/2020 at 15:56

* Graphic: World FX rates in 2020

* Euro zone business growth stalls

* UK economy loses momentum

* Response to second wave of virus rattles investors

(Updates prices, adds commentary, changes byline, previous dateline was LONDON)

By Sinéad Carew

NEW YORK, Sept 23 (Reuters) - The dollar expanded on its eight-week high on Wednesday as U.S. equities fell and investors worried about the pace of the global economic recovery as rising coronavirus infections in Europe brought restrictions and European economic data was weak.

Euro zone business growth ground to a halt in September, raising fears that fresh restrictions to quell a resurgence in coronavirus infections might put the economic recovery into jeopardy.

In Britain, the economy also lost momentum, a business survey showed, as consumer-facing sectors suffered, notably from the end of a government subsidy to support restaurants.

"The market continues to re-evaluate its previously very optimistic stance on the status of global risks out there," said Ben Randol, senior FX strategist at Bofa Securities in New York.

"The newsflow has been negative on the virus and negative on growth. We've had some crummy data and also we've had the Fed speakers that have been on balance considerably less dovish than the market seemed to expect which puts positions at risk."

Randol also cited comments from the Federal Reserve that had a less dovish tone than the market had expected.

Chicago Federal Reserve President Charles Evans sent investors to the safety of the dollar on Tuesday by floating the idea of rate hikes.

Then Fed Vice Chair Richard Clarida said on Wednesday policymakers "are not even going to begin thinking" about raising interest rates until inflation hits 2%.

Randol said Clarida's comment "suggests that the Fed still reserves the right to pre-emptively lift rates if it thinks that inflation will be a problem."

The dollar index , which measures the dollar against a basket of six major currencies, was up 0.25% at 94.214 after earlier hitting 94.255, its highest level in two months.

The euro was last down 0.25% at $1.1677 fell to a two-month low of $1.16715 in early morning trading, its lowest since July 27.

Traders in the pound and the euro were also worried that Britain and the European Union will fail to agree a free trade deal, which would cause additional economic strain.

While the pound regained some ground as the session wore on to last trade at Tuesday's closing level of $1.2731, it fell earlier to $1.2676, its lowest since late July.

It came under pressure after British Prime Minister Boris Johnson introduced on Tuesday new restrictions to combat a second wave of the coronavirus.

The Australian dollar was last down 1.13% at US$0.7093, after hitting a seven-week low of $0.70920. The New Zealand dollar dropped 0.95% to $0.6571.

========================================================

Currency bid prices at 10:14AM (1414 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar EUR= $1.1677 $1.1706 -0.25% +4.17% +1.1718 +1.1673

Dollar/Yen JPY= 105.2000 104.9100 +0.28% -3.36% +105.2300 +104.9100

Euro/Yen EURJPY= 122.83 122.83 +0.00% +0.72% +123.0400 +122.6000

Dollar/Swiss CHF= 0.9228 0.9192 +0.39% -4.65% +0.9230 +0.9190

Sterling/Dollar GBP= 1.2731 1.2731 +0.00% -3.98% +1.2759 +1.2677

Dollar/Canadian CAD= 1.3358 1.3301 +0.43% +2.86% +1.3362 +1.3294

Australian/Doll AUD= 0.7093 0.7174 -1.13% +1.03% +0.7177 +0.7095

ar

Euro/Swiss EURCHF= 1.0778 1.0767 +0.10% -0.68% +1.0778 +1.0754

Euro/Sterling EURGBP= 0.9170 0.9193 -0.25% +8.47% +0.9218 +0.9163

NZ NZD= 0.6571 0.6634 -0.95% -2.45% +0.6647 +0.6573

Dollar/Dollar

Dollar/Norway NOK= 9.4146 9.3393 +0.81% +7.25% +9.4176 +9.3338

Euro/Norway EURNOK= 10.9960 10.9480 +0.44% +11.78% +11.0002 +10.9260

Dollar/Sweden SEK= 8.9543 8.9076 +0.25% -4.21% +8.9578 +8.9086

Euro/Sweden EURSEK= 10.4567 10.4305 +0.25% -0.12% +10.4600 +10.4307

(Additional reporting by Julien Ponthus in London)

((sinead.carew@thomsonreuters.com; +1 (646) 223 6186; Reuters Messaging: sinead.carew.thomsonreuters.com@reuters.net))