NEW YORK, Dec 1 (Reuters) - The dollar fell on Tuesday to its lowest in more than 2-1/2 years, as investor appetite for risk increased on the prospects of further fiscal stimulus from the United States as well as expectations of a solid global recovery.

News of a proposed COVID bill sank the dollar further, as did the resumption of talks between U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi later on Tuesday about a stimulus package. The two have not spoken since before the Nov. 3 U.S. election.

The proposed relief bill was $908 billion and would fund measures through March 31, including $228 billion in additional paycheck protection funds for hotels, restaurants and other small businesses.

"Risk overall was on today anyway, and overall that has been the story in November and continuing in December," said John Doyle, vice president of dealing and trading at Tempus, Inc. in Washington.

"Traders are looking for any reason to bid risk up and that comes at the cost of the dollar. When you get a report that a bipartisan stimulus deal can get done after hopes have been dashed, it's just another reason to bid risk up and sell the dollar."

Currencies that trade higher in times of risk appetite such as the euro, sterling, as well as the Australian, New Zealand, and Canadian dollars all rose against the greenback.

The euro and the New Zealand dollar both hit 2-1/2-year highs.

Bitcoin was also on a tear, hitting a record high just under $20,000 . The virtual currency though was last down 3.7% t $18,934.

In midday trading, the dollar index fell 0.6% to 91.361 , hitting 91.263, the lowest since late April 2018.

The dollar extended losses as well after mixed U.S. economic data showing a rise in construction spending, but a decline in a manufacturing index.

The euro hit a 2-1/2-year high vs dollar above $1.20 and was last up 0.9% at $1.2038.

Sterling climbed to a three-month peak versus the dollar after Times Radio said Brexit trade deal talks have entered the "tunnel" stage of negotiations. The "tunnel" is a term for an intense final stage of secretive, make-or-break negotiations.

The pound was last up 0.6% at $1.3402 .

Nagging worries about rising coronavirus cases have not provided the dollar with much safe-haven support. Speculation is growing that the Federal Reserve will act to support the economy through a tough winter before vaccinations become available.

The Fed meets to set policy on Dec. 15 and 16.

Fed Chairman Jerome Powell and Treasury's Mnuchin on Tuesday also urged Congress to provide more help for small businesses amid a surging coronavirus pandemic and concern that relief from a vaccine may not arrive in time to keep them from failing. nL1N2IH0T4

Powell and Mnuchin testified on the CARES Act, under which Congress made $2 trillion available to the Treasury as coronavirus aid, a large portion of which was aimed to support the FOMC's lending programs.

The New Zealand dollar hit its highest since June 2018 and was last up 0.7% at US$0.7055 , while

The Canadian dollar rose against the greenback, which fell 0.4% at C$1.2954, after data showed Canada's economy grew by 40.5% on an annualized basis in the third quarter, rebounding from a historic plunge in the second.

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Currency bid prices at 12:36PM (1736 GMT)

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

Previous Change

Session

Dollar index $91.3120 91.9490 -0.68% +0.00% +91.9640 +91.2630

Euro/Dollar $1.2045 $1.1923 +1.03% +7.44% +1.2055 +1.1927

Dollar/Yen 104.3550 104.3350 +0.05% -3.89% +104.5750 +104.2050

Euro/Yen 125.69 124.39 +1.05% +3.07% +125.7900 +124.4100

Dollar/Swiss 0.9000 0.9092 -1.00% -6.98% +0.9087 +0.9000

Sterling/Dollar 1.3413 1.3325 +0.67% +1.14% +1.3440 +1.3316

Dollar/Canadian 1.2949 1.3008 -0.45% -0.32% +1.3008 +1.2944

Aussie/Dollar 0.7359 0.7345 +0.21% +4.90% +0.7373 +0.7342

Euro/Swiss 1.0841 1.0836 +0.05% -0.10% +1.0859 +1.0833

Euro/Sterling 0.8978 0.8952 +0.29% +6.20% +0.9007 +0.8930

NZ 0.7059 0.7010 +0.71% +4.92% +0.7067 +0.7011

Dollar/Dollar

Dollar/Norway 8.8185 8.9025 -0.89% +0.58% +8.9005 +8.8095

Euro/Norway 10.6240 10.5995 +0.23% +7.99% +10.6465 +10.5648

Dollar/Sweden 8.5002 8.5725 +0.07% -9.06% +8.5793 +8.4842

Euro/Sweden 10.2401 10.2329 +0.07% -2.19% +10.2435 +10.1958

(Reporting by Gertrude Chavez-Dreyfuss Editing by David Gregorio and Nick Zieminski)

((gertrude.chavez@thomsonreuters.com; 646-301-4124; Reuters Messaging: rm://gertrude.chavez.reuters.com@reuters.net))