FOREX-Dollar rises on coronavirus unease, Aussie and Kiwi hurt by rate outlook

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Dollar holds strong gains against European currencies
* Response to second wave of virus rattles investors
* U.S. political uncertainty to limit dollar's upside
* Aussie and kiwi fall on interest rate outlook

By Stanley White
TOKYO, Sept 23 (Reuters) - The U.S. dollar rose against
major currencies on Wednesday, supported by positive U.S.
economic data and concerns about a second wave of coronavirus
infections in Europe and Britain.
Both the Australian and New Zealand dollars were undermined
by a dovish slant on policy by their respective central banks.
The Aussie hit a six-week low on growing expectations the
Reserve Bank of Australia (RBA) may cut interest rates next
month. The kiwi dollar edged lower in choppy trade after the
country's central bank kept monetary policy unchanged but hinted
at further easing to help the economy. The greenback is likely to continue to grind higher in the
short term as the coronavirus rattles sentiment in Europe, but
uncertainty about this year's U.S. presidential election means
the dollar could be prone to more volatile swings.
"Some people are betting for more dollar strength against
the euro, which looks overvalued," said Masafumi Yamamoto, chief
currency strategist at Mizuho Securities in Tokyo.
"The picture in Europe has completely changed, because the
economic recovery is stalling and there is a second wave of the
virus, but I'm also worried about U.S. politics."
The dollar edged up to $1.1675 per euro EUR=D3 on
Wednesday, which is the highest since July 27.
The pound GBP=D3 bought $1.2721, near the lowest since
late July, after British Prime Minister Boris Johnson unveiled
on Tuesday new restrictions on business activity to tackle a
second wave of the coronavirus. The dollar rose to 0.9218 Swiss franc CHF=EBS , adding to a
0.6% gain from Tuesday.
The U.S. currency rose to 105.98 yen JPY=D3 .
On Tuesday, the greenback was bolstered by data showing U.S.
home sales surged to their highest level in nearly 14 years in
August, but comments from a prominent Federal Reserve official
sent mixed signals. The U.S. economy risks a longer, slower recovery and
"recessionary dynamics" if Congress fails to pass an additional
fiscal stimulus package, Chicago Federal Reserve President
Charles Evans said. It is possible for the Fed to raise interest rates before
inflation starts to average 2%, Evans also said.
The dollar index =USD , which pits the dollar against a
basket of six major currencies, rose to 94.197 on Wednesday, the
highest in two months.
Sentiment for the euro has slowly weakened as investors grow
increasingly worried about surging coronavirus infections in
countries like France and Spain, raising the risk of fresh
lockdowns. Many euro zone countries have reintroduced travel
restrictions, forcing airlines to scale back passenger services
after a relatively quick run up over the summer.
Traders in the pound and the euro are also worried that
Britain and the European Union will fail to agree a free trade
deal, which would cause additional economic strain.
The Australian dollar AUD=D3 fell to a six-week low of
$0.7116 after economists at Westpac changed their view and said
they expect the RBA to lower interest rates to 0.10% from 0.25%
at a meeting on Oct. 6.
The tone for the Aussie was also weak after a senior central
banker on Tuesday flagged the prospect of currency market
intervention and negative interest rates. The New Zealand dollar NZD=D3 lost 0.33% to $0.6612 after
the Reserve Bank of New Zealand held its policy rate at 0.25%,
but warned of job losses and business closures, which reinforced
expectations it would move to negative interest rates in coming
months.