FOREX-Dollar holds its ground as investors await U.S. stimulus talks

* Dollar bounces back after 7 weeks of decline
* Investors stick to hope of more stimulus talks
* Turkish lira near record low
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano and Eimi Yamamitsu
TOKYO, Aug 11 (Reuters) - The dollar held overnight gains on
Tuesday following seven weeks of an almost relentless fall as
investors clung to hopes of a bipartisan stimulus deal in
Washington and U.S. bond yields rebounded from multi-month lows.
The dollar index jumped back to 93.568 USD= from Friday's
two-year low of 92.495. Having fallen for seven straight weeks,
the currency was due for a short-term corrective bounce, traders
said.
The euro changed hands at $1.1745 EUR= up slightly on the
day, having eased 0.5% in previous trade. The dollar stood
little changed at 106.07 yen JPY= .
"The dollar's decline appears to have come to a halt for
now. Although talks on fiscal spending are locked in a
stalemate, we are at least avoiding a complete cutoff of extra
jobless benefit," said Minori Uchida, chief currency analyst at
MUFG Bank.
U.S. President Donald Trump on Saturday signed executive
orders restoring part of enhanced unemployment payments and
suspending payroll taxes. "Compared to market consensus of a stimulus deal worth $1
trillion-$1.5 trillion, economic boosts from the announced
measures would be clearly smaller," said Takafumi Yamawaki, head
of Japan rates and FX research at JPMorgan.
"Looking at market reactions, investors appear to think that
there will be some sort of deal eventually," JPMorgan's
Yamawaki.
U.S. congressional leaders and Trump administration
officials said on Monday they were ready to resume negotiations
on a coronavirus aid deal, although it was unclear whether
Democrats and Republicans would be able to bridge their
differences. On Monday, the S&P500 index .SPX rose to a five-month high
while the yield on 10-year U.S. Treasuries rose to as high as
0.581% US10YT=RR , its highest level in more than a week.
Investors are also keeping an eye on the rapidly
deteriorating relationship between Washington and Beijing.
China imposed sanctions on 11 U.S. citizens, including
Republican lawmakers, following Washington's sanctions on Hong
Kong and Chinese officials. U.S. Treasury Secretary Steven Mnuchin said companies from
China and other countries that do not comply with accounting
standards will be delisted from U.S. stock exchanges as of the
end of 2021. While the market has shown limited response to the latest
salvos, analysts say the confrontations have longer term
implications.
"What used to be a dispute over trade has now evolved into
something about ideology," said Daisuke Uno, chief strategist at
Sumitomo Mitsui Bank.
"On the whole, the U.S.-China tensions could lead to dollar
selling but the negative impact will not be limited to the U.S.
Stagnant trade between them could hurt the (global) economy."
Elsewhere, the Turkish lira stayed near a record low hit on
Friday on concerns about the country's depleting foreign
reserves, leading to expectations that the central bank may take
more decisive action to stem its fall.
The lira was quoted at 7.340 per dollar TRYTOM=D3 , just
above Friday's record low of 7.365.
With more wild swings in the Turkish currency expected,
implied volatilities, calculated from option prices, have
soared, with three-month volatility TRY3MO= rising to 23.6%,
its highest since April last year.
Rikiya Takebe, senior strategist at Okasan Online
Securities, said "the lira will probably face a storm or two,"
as Turkey's central bank will likely intervene in the currency
markets ahead of its meeting next week.
"Investors might grow wary of capital flight in a
government-controlled market, which may also prompt them to sell
the lira for dollars, yen or euros," he said.
Separately, Bank of England Deputy Governor Dave Ramsden
said in an interview published on Tuesday that the central bank
will step up quantitative easing (QE) if the British economy
slows again. The British pound hardly budged at $1.3085 GBP=D4 .