FOREX-Dollar loses out as hopes of economic recovery spread

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Dollar falls as other economies enter recovery
* U.S. protests unnerve some investors
* Euro in focus before ECB

By Stanley White
TOKYO, June 3 (Reuters) - The dollar fell against most
currencies on Wednesday as prospects of more government stimulus
and a global economic recovery emboldened investors to step up
holdings of riskier assets.
The Australian dollar surged to a five-month high against the
dollar, as funds headed toward economies that are seen to be
recovering the fastest from the coronavirus pandemic.
The euro rose to the highest in almost three months on hopes
policymakers will support the euro zone's weakest economies with
debt purchases to keep yields low.
The greenback also fell against the British pound, the yen,
and the Swiss franc as investors pondered mass protests against
racism spreading across the United States.
"The U.S. dollar is generally weak," said Yukio Ishizuki, FX
strategist at Daiwa Securities in Tokyo.
"The Australian dollar has a lot of room to run because
there are still a lot of shorts that need to be covered. The
economy recovery story is the main factor."
The Australian dollar AUD=D3 surged more than 1% to
$0.6982, the highest since Jan. 3.
The Aussie pared its gains to trade at $0.6937 after data
showed the Australian economy contracted as expected in the
first quarter. The country's treasurer said it is already in
recession, but traders said sentiment has turned bullish because
lockdown restrictions are easing and commodity prices are
rising.
Across the Tasman Sea, the New Zealand dollar NZD=D3 rose
to $0.6430, the highest since March 9.
The greenback also slumped to a one-month low of $1.2615
against the British pound GBP=D3 .
The euro EUR=D3 rose to $1.1205 on Wednesday, close to the
highest since March 16.
The European Central Bank is expected to increase its 750
billion euro ($839.25 billion) bond-buying programme, the
Pandemic Emergency Purchase Programme, when it meets on
Thursday, probably by around 500 billion euros. The ECB scooped up all of Italy's new debt in April and May
but merely managed to keep borrowing costs for the indebted,
virus-stricken country from rising, data showed on Tuesday.
The greenback grinded lower against safe-haven currencies
due to concerns about the widening economic impact of protests
in the United States.
The dollar bought 0.9610 Swiss franc CHF=D3 , close to a
two-month low.
The U.S. currency fell to 108.51 yen JPY=EBS , pulling back
from a two-month high reached early in Asian trading on
Wednesday.
The U.S. Department of Defense has moved about 1,600 U.S.
Army troops into the Washington, D.C., region, the Pentagon said
on Tuesday, after several nights of violent protests.
President Donald Trump has threatened to use the military to
quell spreading protests against racism and police brutality,
but U.S. stocks continue to rally, leaving some currency traders
confused about the market's direction. In onshore trade, the yuan CNY=CFXS briefly rose after
encouraging data on China's services sector but gradually fell
to 7.1112 as Chinese companies scooped up dollars to meet
seasonal payments. The coronavirus first emerged in China late last year, but
it is also the first major economy to ease severe lockdown
restrictions, meaning it is likely to recover earlier than other
countries.
($1 = 0.8937 euros)

(Editing by Sam Holmes and Jacqueline Wong)