* Fed sticks to dovish script
* USD headed for worst month in a decade vs EUR
* Dollar stabilises on most majors in Asia
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Hideyuki Sano and Tom Westbrook
TOKYO/SINGAPORE, July 30 (Reuters) - The dollar was mired at
a more than two-year low on Thursday, as investors grew
increasingly worried about the economic drag of surging
coronavirus cases in the United States, and looked to a fiscal
rescue package stalled in Congress for another stimulus hit.
Overnight, the Federal Reserve kept pressure on the currency
by leaving the door open to further easing, while calling out
the economic toll from the latest wave of new infections.
Against a basket of currencies =USD the dollar was pinned
close to its lowest since mid-2018 at 93.344, while Antipodean
currencies were poised near multi-month peaks. AUD/
Against the euro EUR=EBS , the dollar was just above a
22-month low of $1.1807 touched overnight. The greenback is set
for its worst month in a decade on the common currency as the
recovery outlook in Europe brightens just as it darkens in the
United States.
The U.S. epidemic has intensified since June. California,
Texas and Florida all posted one-day records for fatalities on
Wednesday. Fed Chair Jerome Powell said the new wave of cases were
harming the recovery and indicated more fiscal support would
help when asked what more could be done. "Fiscal policy is essential here," he said. "Very likely,
more will be needed from all of us. I see Congress negotiating
now over a new package, and I think that's a good thing."
However, those negotiations are at an impasse as a Friday
deadline for extending a $600-per-week unemployment benefit
looms. Democrats are resisting a stop-gap extension in favour of
pressing for passage of a comprehensive bill.
"Concerns around rising virus cases and their impact on the
labour market and activity will be further compounded if
Congress cannot agree," said Seema Shah, chief strategist at
Principal Global Investors in London.
"The recovery is at stake."
The safe haven yen JPY= sat at 105.07 per dollar, having
hit a four-and-a-half-month high of 104.77 on Wednesday.
The dollar has lost 4.6% of its value against the euro and
2.7% against the yen in July and slid 7% against a basket of
currencies since mid May =USD .
DOLLAR DECLINE
The dollar has been tumbling as investors see the virus
raging in the United States and begin to doubt the conventional
wisdom that U.S. growth and investment returns in dollars can
best most other countries.
Advance quarterly GDP data due at 1230 GMT will likely be
one for the record books, with economists anticipating a 34%
drop in annualised economic output last quarter. Employment data is also due and further weakness will likely
fuel speculation that the Fed might - perhaps at its next
meeting in September - loosen its approach to inflation.
"One possible outcome could be adoption of an average
inflation target, which would see rates lower for longer, in
order to generate an overshoot down the track," ANZ analysts
said in a note.
Elsewhere growing nervousness about global tensions with
China dragged on risk sentiment. The Australian dollar AUD=D3
was 0.1% softer at $0.7178 and the kiwi NZD=D3 slipped 0.3% to
$0.6646.
Sino-U.S. relations have deteriorated sharply over issues
ranging from the pandemic to Beijing's territorial claims in the
South China Sea and its clampdown on Hong Kong.
That has weighed on the yuan, which has been all but left
behind as the dollar has slumped, and was steady on Thursday at
6.9965 per dollar onshore CNY= . CNY/
China is also lagging behind agricultural purchases promised
under January's trade deal. Elsewhere, the Turkish lira hovered at a 2-1/2 month low
against the dollar TRYTOM=D3 and a record low versus the euro
EURTRYD3=R , on rising concerns over depleted reserves and
local demand for dollars despite state efforts to stabilise
trading.