FOREX-Dollar holds soft tone as vaccine hopes boost riskier assets

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Encouraging vaccine trial offers hope in pandemic battle
* Risk sentiment improves in FX, stocks, commodities
* Kiwi rises after RBNZ interview

By Stanley White
TOKYO, May 19 (Reuters) - The dollar nursed losses against
major currencies on Tuesday after encouraging results from the
trial of a vaccine for COVID-19 improved sentiment in a boost to
riskier assets.
The euro held onto hefty gains against the Swiss franc and
the dollar following a proposal by France and Germany for a 500
billion euro ($543 billion) recovery fund offering grants to
regions hit hardest by the coronavirus crisis.
Currencies linked to commodities and other riskier assets
were broadly supported, helped also by a sharp rebound in oil
prices as investors' focus turned to recovery from the pandemic.
"There has been a big improvement in risk sentiment because
of hopes for a vaccine," said Junichi Ishikawa, senior FX
strategist at IG Securities in Tokyo.
"Volatility is falling for stocks and dollar-funding costs
are lower. It's easy for the dollar to fall and for other
currencies to ride the dollar's losses higher."
Wall Street shares, emerging market assets, and commodities
all rallied after encouraging data from a COVID-19 vaccine trial
by U.S. drugmaker Moderna MRNA.O added to the optimism as more
governments scale back lockdown restrictions.
The euro EUR=EBS bought $1.0913 on Tuesday, having gained
0.9% against the greenback in the previous session.
The common currency EURCHF=EBS traded at 1.0613 Swiss
franc after jumping on Monday to the highest in more than two
months.
The euro's rally overnight came after France and Germany
proposed that the European Commission borrow money on behalf of
the whole EU for the recovery fund. The news also sent Italian
government bond yields skidding to their lowest in more than a
month. The proposed fund is mostly expected to benefit Italy and
Spain, whose economies have been hit hard by the coronavirus
pandemic but have weak public finances.
The euro's sudden rise will face a test later on Tuesday
with the release of the closely-watched ZEW survey on German
investor sentiment.
The pound GBP=D3 also benefited from the dollar's losses
and rose to $1.2204, but traders are bracing for the release of
British jobs data later on Tuesday.
The dollar JPY=EBS was little changed at 107.39 yen.
While coronavirus infection rates in many places have now
fallen to levels low enough to allow factories and businesses to
re-open, some concern remains because the outbreak is not
completely under control.
The novel coronavirus, which causes the COVID-19 illness,
first emerged in China late last year and has paralysed global
economic activity as it spread across the world.
In the onshore market, the yuan CNY=CFXS was steady at
7.1090 per dollar. Investors in the pair remain wary due to
simmering tension between the United States and China over trade
policy and criticism of China's early response to the
coronavirus.
The yuan is likely to trade narrowly ahead of China's annual
parliament meeting due to start on Friday, where the government
is expected to unveil economic targets and stimulus plans.
Moreover, some economists are starting to question whether
the People's Bank of China should adopt quantitative easing to
finance an expected surge in government bonds. Elsewhere, the antipodean currencies stood tall against
their U.S. counterpart, benefiting from the improvement in risk
appetite and rising commodity prices.
The Australian dollar AUD=D3 traded at $0.6530, close to a
one-week high, after the release of minutes from the Reserve
Bank of Australia's most recent monetary policy meeting offered
no surprises.
The New Zealand dollar NZD=D3 rose 0.25% to $0.6054. The
kiwi rose briefly after Reserve Bank of New Zealand Deputy
Governor Geoff Bascand told Reuters the central bank will
re-evaluate its monetary easing in about three months to
determine whether "to do more or take the foot off the pedal a
little bit." (Editing by Shri Navaratnam and Jacqueline Wong)