FOREX-Dollar ekes weekly gain as infections sap confidence; EU Summit awaited

* Small weekly rise would be dollar's best since May
* AUD, NZD rally pauses as second-wave fears stall optimism
* Euro pressured as EU Summit eyed
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, June 19 (Reuters) - The dollar headed for its
best week in a month on Friday, as a resurgence in coronavirus
cases knocked confidence in a rapid economic recovery and drove
investors to the safety of the world's reserve currency.
Geopolitical tensions on the Korean peninsula, in the
Himalayas and between China and its trading partners have also
dented the mood, and the balance of risks kept moves modest in
Asia.
The dollar traded near a two-week high against a basket of
currencies =USD and has gained about 0.3% for the week, not
much but enough to mark its largest weekly rise since mid-May.
The strength - and the drivers behind it - has stalled a
rally in the risk-sensitive Australian and New Zealand dollars,
which have both spent the week rangebound. AUD/
"The bulls need new news and inspiration to push prices
higher. That inspiration isn't readily available," said Chris
Weston, head of research at Melbourne brokerage Pepperstone.
U.S. President Donald Trump on Thursday renewed his threat
to cut ties with China, a day after the first high-level talks
between the countries in months amid souring relations.

The meeting, between top diplomats in Hawaii, was
inconclusive though a senior U.S. participant said China had
committed to sticking with the trade deal the two parties agreed
in January. Also in focus for markets was an uptick in coronavirus cases
in many U.S. states this week, along with rising
hospitalisations, reflecting a troubling national trend that has
seen daily infection numbers climbing after more than a month of
declines. More than 150 new cases have also been detected in Beijing
since last week, unnerving investors wary about a return of
global lockdowns as it prompted a lift in the city's alert level
and a reintroduction of travel curbs. The Aussie AUD=D3 , which has rocketed almost 25% from
March lows, has turned more sedate over recent sessions and only
made very marginal gains on Friday, rising 0.1% to $0.6861
despite a record surge in retail sales to pre-virus levels.
The kiwi NZD=D3 slipped to $0.6407, its lowest since
Monday. The safe-haven Japanese yen JPY= firmed a fraction to
106.90 per dollar.
"This state of play could potentially extend into early part
of next week as markets continue to reassess the risks of
second-wave COVID-19 infection vs progress on vaccine
development," analysts at Maybank in Singapore said in a note.
Elsewhere, the British pound GBP=D3 sat a fraction above a
two-week low at $1.2432, under pressure as investors fretted
that the Bank of England may not be planning enough bond buying
to support confidence through 2021. SUMMIT IN FOCUS
Market attention now turns to a European Union summit
beginning at 0800 GMT where bloc leaders are trying to navigate
regional divisions to deliver a 750 billion euro coronavirus
recovery fund. The euro EUR= , which was steady at $1.1212 in Asian trade,
has lost about 1.3% of its value against the dollar since
Tuesday as questions grow about whether the plan can be
realised.
"Any sense of disappointment on the virus recovery plan
should see the pair breach 1.1200 convincingly, and open the
path towards 1.1050," said Terence Wu, an FX strategist at OCBC
Bank in Singapore.
"All bearish bets will be off if cohesion is shown over the
virus recovery front."
Investors are also keeping a wary eye on Australian trade
ties, as relations strain with its biggest trading partner,
China, over the handling of the coronavirus outbreak.
A "sophisticated state-based actor" has been attempting to
hack a wide range of Australian organisations for months and had
stepped up its efforts recently, Prime Minister Scott Morrison
said on Friday. Reuters reported Canberra had determined in March last year
that China was responsible for a hacking attack on Australia's
parliament. Australia never publicly identified that source of
the attack and China denied it was responsible.