FOREX-Dollar falls to two-year lows as U.S coronavirus cases surge

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Saikat Chatterjee
LONDON, July 29 (Reuters) - The U.S. dollar fell to a
two-year low on Wednesday as pressure built on the Federal
Reserve to strike a dovish policy stance amid a surge in
coronavirus cases.
Markets expect policymakers to hold fire, but rising
infection rates and increased tensions is leading some analysts
to predict strong forward guidance from the Fed.
"These factors mean we should expect a decidedly more
pessimistic assessment of the outlook for economic growth," said
Derek Halpenny, head of research at MUFG Bank. "We should also
probably expect some focus on the U.S. dollar, given the notable
move we have had since the last meeting."
Against a basket of other currencies =USD , the dollar fell
0.4% to 93.41, its lowest level since June 2018. It has weakened
more than 3% since the last Fed meeting as yields on benchmark
U.S. Treasury debt have fallen more than 20 bps since then.
U.S. consumer confidence fell more than expected in July,
losing steam following two months of recovery, in another sign
that rising COVID-19 infections are cutting into consumption.
"Given the concerns about the second wave of infections,
markets think the Federal Reserve is likely to take a dovish
policy stance," said Yujiro Goto, chief FX strategist at Nomura
Securities.
The euro traded at $1.1762 EUR=EBS , up 0.3%, though it has
stepped back from Monday's 22-month high of $1.17815. The dollar
traded at 104.82 yen JPY=EBS , down 0.25% on the day.
Investors will also be watching for any indications that the
Fed will increase its purchases of longer-dated debt, implement
yield caps or target higher inflation than previously indicated
when its two-day meeting ends on Wednesday.
The weakening dollar also pushed the Australian dollar
higher with the currency traded at $0.7185 AUD=D4 , hitting a
15-month peak after data showed Australia's consumer prices fell
by a record in the second quarter.