FOREX-Dollar heads for biggest monthly drop in a decade as virus fuels U.S. economy fears

* Dollar has lost nearly 5% in July
* Euro jumps to $1.19, eyes best month since 2010
* Anti-dollar sentiment builds on election worries
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tommy Wilkes
LONDON, July 31 (Reuters) - The dollar extended its dramatic
fall on Friday, putting it on course for its biggest monthly
drop in a decade as investors fretted that a rebound in the U.S.
economy would be derailed by the struggle to stem the
coronavirus epidemic.
Weakness in the U.S. currency propelled the euro higher,
with the single currency touching $1.19, its strongest since May
2018, and enjoying its best month since September 2010.
Confidence in the U.S. currency was undermined further after
U.S. President Donald Trump on Thursday raised the possibility
of delaying the nation's November presidential election.
That came on the same day advance gross domestic product
(GDP) data showed contraction of an annualised 32.9% in the
second quarter, the quickest pace since the Great Depression.
The dollar index slid to as low as 92.546 =USD , levels
last seen in May 2018.
It has fallen 4.9% in July, with most of the drop coming in
the last 10 days as new cases of coronavirus surged across
several U.S. states and some recent data pointed to an economic
recovery losing steam. Unicredit analysts said they "continue to expect the USD
weakness to persist in August, a month in which abrupt moves in
intraday activity tend to be more likely due to lighter market
conditions."
"However, given ongoing global economic growth concerns,
worries about further COVID-19 developments and the depreciation
the U.S. dollar has already suffered in the past few weeks, we
think that downward pressure on the greenback over the coming
month will be less intense than it has been recently."
The euro surged to as high as $1.1908 before settling at
$1.1897 EUR=EBS , up 0.5% on the day.
The euro traded below $1.10 as recently as May, but after
European Union leaders agreed this month to a 750 billion euro
economic recovery fund - while also taking on debt jointly in a
major boost to regional cooperation - many investors have warmed
to the single currency again.
On a trade-weighted basis, the euro is at its highest since
2014 EUREER=ECBF .
"Disinflationary pressure from the unprecedented hit to
demand alongside the strengthening euro will keep pressure on
the ECB to deliver further policy stimulus," MUFG analyst Lee
Hardman said.
The dollar's drop this month has given currencies that were
hit hard in March and April, when investors rushed for the
safety of the greenback as panic over the coronavirus gripped
markets, space to rebound.
Against the yen, the dollar hit a 4-1/2-month low of 104.195
yen and last stood at 104.36 JPY=EBS , having lost 3.3% this
month.
The British pound surged to $1.3143 GBP=D3 , a 4-1/2-month
high. It was slightly weaker versus the euro at 90.60 pence
EURGBP=D3 .
The Swiss franc extended its rally against the dollar, with
the U.S. currency losing another 0.3% to 0.9057 francs
CHF=EBS , its weakest since early 2015.

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