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FOREX-Dollar hits 2-week high on risk-off tone, pound drops
Published at 15/10/2020 at 20:45

* Euro down vs dollar

* Dollar gains vs peer safe-haven yen

* Sterling gives back all of prior session's gains

* Graphic: World FX rates in 2020

(Adds details on stimulus talks, updates prices)

By Chuck Mikolajczak

NEW YORK, Oct 15 (Reuters) - The dollar jumped to a two-week high on Thursday and the Japanese yen rose as investors sought safe havens on signs of a stalling U.S. economic recovery and new fiscal stimulus seemed unlikely before the U.S. presidential election.

The dollar strengthened as U.S. equities dropped following data that showed the labor market recovery losing steam and New York manufacturing activity falling more than anticipated.

Weekly jobless claims rose to 898,000, up 53,000 from the prior week and above the 825,000 estimate, increasing concerns the COVID-19 pandemic was causing lasting damage to the labor market.

U.S. President Donald Trump said he was willing to raise his offer of $1.8 trillion for a COVID-19 relief deal with Democrats in Congress, but the idea was nixed by fellow Republican, Senate Majority Leader Mitch McConnell.

"There is still plenty of distance between all parties that have a role to play in an agreement and the assumption the market has that a deal is coming sooner rather than later is being challenged," said portfolio manager Keith Buchanan at GLOBALT Investments in Atlanta.

"That challenge becomes more and more apparent every day that ticks by without a significant progression as far as negotiations are concerned and we are just not seeing it."

The dollar index rose 0.459% after touching a two-week high of 93.91.

The British pound, lifted on Wednesday by signs of progress in Brexit talks, relinquished those gains as concerns about trade talks with Europe resurfaced and London faced tighter coronavirus restrictions.

Sterling was last trading at $1.2893, down 0.91% on the day.

The European Union put the weight on Britain to compromise on their new economic combination or be prepared for trade disruptions in less than 80 days, drawing a chilly reaction from the UK, which said it was "disappointed" and would respond on Friday. In addition, rising coronavirus cases across the bloc led to worries about the possible economic fallout.

France has imposed curfews as coronavirus infections rise, and other European Union members were also responding to spiking new cases with fresh restrictions.

Markets fear a new wave of lockdowns could stall the global recovery as hopes for U.S. stimulus before the Nov. 3 election are fading.

While weaker against the dollar, the yen strengthened 0.12% versus the euro. Bloomberg reported the European Central Bank "sees little reason" to rush into a new stimulus this month even as coronavirus cases spike and the economy slows.

The euro was down 0.41% to $1.1698 against the greenback.

(Reporting by Chuck Mikolajczak; Editing by Steve Orlofsky and Richard Chang)

((charles.mikolajczak@tr.com; @ChuckMik; Reuters Messaging: charles.mikolajczak.thomsonreuters.com@reuters.net))