* Dollar falls after successful COVID-19 vaccine trial
* Australian, New Zealand dollars up as trade risks fall
* Swedish, Norwegian crowns inch to 2-month highs
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, May 19 (Reuters) - The euro rallied on Tuesday,
propelled by a Franco-German proposal on Monday for a fund that
would offer grants to European Union regions and sectors hit
hardest by the coronaries pandemic.
The common currency was also buoyed by a weaker dollar,
which lost its safe-haven appeal after encouraging results from
the trial of a vaccine for COVID-19, boosting riskier assets.
Germany and France, whose agreements usually pave the way
for broader EU deals, proposed that the European Commission
borrow the 500 billion euros ($546.90 billion) on behalf of the
whole EU. The commission is expected to outline their proposal
for the fund before a European Summit scheduled for May 27.
The euro bought $1.0926 EUR=EBS after rising to a two-week
high of $1.0945 earlier. And the cost of betting against the
euro versus the dollar in currency-derivatives markets fell on
Tuesday to the lowest since mid-March. The common currency was 0.2% higher versus the Swiss franc
at 1.0622 EURCHF=D3 , after rallying to an 11-week high the day
before.
"The Franco-German proposal represents a material step
forward towards harnessing joint fiscal capacity to provide
sustained fiscal stimulus to support the economic recovery,"
said Lee Hardman, currency analyst at MUFG.
Gauges for overnight euro implied volatility rose to a
three-week high of 9.10% EURONO=FN , suggesting traders were
expecting bigger-than-usual moves in the common currency on
Tuesday.
The dollar was down 0.1% against a basket of currencies at
99.51 =USD , having touched a two-week low of 99.37 earlier.
Moderna Inc's MRNA.O experimental COVID-19 vaccine, the
first to be tested in the United States, produced protective
antibodies in a small group of healthy volunteers. "The market's positive reaction to the report is
understandable as finding a vaccine for COVID-19 is the search
for the Holy Grail. It would allow a return to normal at a much
faster pace and significantly reduce long-lasting damage to the
global economy," Hardman said.
With governments scaling back lockdown restrictions,
investors grew optimistic that economies could soon return to
normal.
Trade-sensitive currencies such as the Australian dollar
rose to a three-week high of 0.6564 AUD=D3 . The New Zealand
dollar was last up 0.7% at 0.6076 NZD=D3 .
The Swedish and Norwegian crowns rose by 0.3% each to
two-month highs SEK=D3 NOK=D3 .
Still, 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 under control.
($1 = 0.9142 euros)