CORRECTED-FOREX-Dollar drifts as markets look for certainty on U.S. stimulus

(Corrects euro levels in paragraph 11 to $1.1842 and $1.18805,
not $1.8420 and $1.8805)
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Eimi Yamamitsu
TOKYO, Oct 22 (Reuters) - The U.S. dollar treaded water
against most major currencies on Thursday as U.S. stimulus talks
remained the focus for markets with trading buffeted over recent
days by the extent of progress made on the potential size of the
aid package.
The dollar index =USD was nearly flat against a basket of
currencies at 92.792, having marked its lowest level since Sept.
2 overnight.
On Wednesday, the dollar weakened to a seven-week low after
U.S. President Donald Trump and House Speaker Nancy Pelosi
boosted hopes an agreement on stimulus was close, sparking
demand for riskier assets. ”For a while, the pattern has been that when stimulus talks
stalled, equities fell and the dollars were being bought due to
risk-averse sentiment. But with optimistic headlines like these,
the market is inclined to shift to risk-on mood and sell the
dollars,” said Daisuke Karakama, chief market economist at
Mizuho Bank.
But prospects remain dim for the Republican-controlled
Senate to approve any aid before the Nov. 3 election, as
President Trump accused Democrats of being unwilling to craft an
acceptable compromise on stimulus. Separately, Federal Reserve Governor Lael Brainard said the
biggest risk to her outlook for economic recovery was that
fiscal support from the federal government would be withdrawn
too soon. Analysts said the dollar was also pressured by a surge in
currencies such as the sterling GBP=D3 , which jumped to a
six-week high overnight after Britain's chief Brexit negotiator
said talks with the European Union will resume on Thursday
afternoon. In Asian trade, the pound's uptick paused, down 0.15% at
$1.3127.
"We continue to believe it is in both EU and UK's interests
to strike a deal. Disruption to trade can affect Europe...and
the resurgence of COVID-19 in Europe including within the UK
could increase the need for a deal to avert further economic
impact on both sides," analysts at Maybank in Singapore wrote in
a note.
"Nonetheless, given the pace of the GBP rally recently, we
are more cautious on whether further up-moves in the interim can
gain traction without new positive developments," they said.
The euro EUR=EBS edged 0.16% lower against the dollar to
$1.1842, a fraction below a one-month high of $1.18805 hit on
Wednesday.
Traders are also awaiting the final debate between President
Trump and Democratic rival Joe Biden later in the day, with the
key feature this time around being a mute button to allow each
candidate to speak uninterrupted. The Japanese yen JPY=EBS drifted away from its four-week
high of 104.345 marked overnight, last sitting at 104.74 against
the greenback.
"Dollar/yen trades are especially on wait-and-see ahead of
the presidential debate," said Sumino Kamei, senior analyst at
MUFG Bank.
The Australian dollar AUD=D3 eased as E-mini futures for
the S&P 500 EScv1 lost more than 0.7% and as the currency
remained vulnerable to further policy easing from the Reserve
Bank of Australia.
The Aussie was last fetching A$0.7090, while the kiwi
NZD=D3 pulled back slightly to 0.6645 but still held above the
near two-week low it touched on Tuesday.
Elsewhere, the Chinese yuan retreated CNY=CFXS , last
changing hands at 6.6669 at midday, after hitting its strongest
level since July 2018.