FOREX-Euro, Aussie gain on economic recovery hopes

* Euro at strongest since mid-March, dollar weaker
* Aussie jumps as much as 1.3%; Kiwi also rises
* Hopes for U.S.-China relationship, economic rebound
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds new analyst quote, details, latest prices)
By Tommy Wilkes
LONDON, June 1 (Reuters) - The euro briefly hit its
strongest since mid-March on Monday and riskier currencies like
the Australian dollar rallied as investors looked to further
signs that economies may be through the worst of the downturn
caused by the coronavirus.
Investors were also relieved that U.S. President Donald
Trump made no move to impose new tariffs on China during a news
conference on Friday during which he outlined his response to
Beijing's tightening grip over Hong Kong.
Economic data suggested the collapse in manufacturing output
had found a bottom in some countries.
In China, the Caixin/Markit Purchasing Managers Index (PMI)
showed a marginal but unexpected improvement in Chinese factory
activity last month. In the euro zone, the manufacturing PMI recovered somewhat
in May from April's record low, although factory activity still
contracted heavily. Japan and South, however, saw the sharpest
falls in activity in more than a decade. The trade-sensitive Australian dollar AUD=D3 was the
standout performer, surging as much as 1.3% to a four-month high
of $0.6772.
The Aussie is now up more than 20% from March lows. It
gained steadily through May as the country brought coronavirus
under control and has started June with a jump as the price of
iron ore - Australia's top export - hit record highs.
The euro gained, rising 0.4% to $1.1154 before falling back
to trade flat at $1.1109 EUR=EBS .
"We turn strategically bullish on EUR/USD following the EU
debt recovery fund proposal," Morgan Stanley strategists said,
referring to the European Commission's proposals for a 1.85
trillion euro fiscal package. The strategists, who expect more easing from the European
Central Bank when it meets on Thursday, recommend buying the
euro with a target of $1.155 - a level the single currency last
traded at in January 2019.
With other currencies rising, the dollar fell to its weakest
since March 16, before recovering somewhat. Against a basket of
currencies the dollar index was last down 0.1% at 98.15 =USD .
ING analysts said the door to a weaker dollar had been
opened now that new U.S. measures imposed over Hong Kong had
proved less serious than feared and as OPEC+ looked set to
extend oil supply cuts, which will boost commodity-linked
currencies.
"We had pencilled in a bigger dollar decline for the second
half of the year but will be alert to this trend emerging sooner
than we had expected," they said.
Analysts said unrest in major U.S. cities against police
brutality was concerning but unlikely to shift short-term
optimism about the U.S. economy. Sterling GBP=D3 rose as much as 0.6% to a three-week high
of $1.2425, helped by Britain gradually moving out of lockdown.
China's offshore yuan CNH=EBS edged lower - it rallied on
Friday on hopes for a softening in Sino-U.S. tensions.
The New Zealand NZD=D3 and Canadian dollars CAD=D3
climbed.
The Japanese yen inched higher, with the dollar down 0.2% to
107.66 yen JPY=EBS .

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(Editing by Jan Harvey and Ed Osmond)