FOREX-Dollar near two-month high amid economic, political risks

* Dollar off two-month high after best week in almost half
year
* Big net short position in dollar point to chance of
further rise
* Euro hampered by concerns about infections
* Turkish lira at record low as rate hike boost fades
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, Sept 28 (Reuters) - The dollar traded near a
two-month peak against a basket of currencies on Monday, as
doubts about economic recovery persisted before a barrage of
economic data and political developments in the United States.
A rebound in U.S. stocks on Friday has helped to curb the
ascent of the dollar, considered a safe haven, but signs of
slowdown in the nascent recovery from the pandemic and political
uncertainties have kept investors on guard.
The dollar index stood little changed at 94.530 =USD . It
reached a two-month high of 94.745 last week and posted its
biggest weekly rise since early April. Against the yen, the
dollar was more subdued at 105.36 yen JPY= .
The euro traded at $1.1626 EUR= after dropping to $1.16125
on Friday, its lowest in two months. The British pound stood at
$1.2797 GBP=D4 , above Wednesday's two-month low of $1.2676.
"Last week, widening credit spreads as seen in iTraxx
Crossover and in European financials were seemingly a key driver
for weakness in euro/dollar," said Christin Tuxen, head of
research at Danske Bank.
"Indeed, rising global and notably European risk aversion
continue to be clearly U.S. dollar positive, and notably
investors entered this period of questioning the
risk/reflation/recovery theme stretched on dollar shorts."
Data on U.S. currency futures positions released on Friday
also pointed to upside potential in the dollar's recovery, with
speculators holding a big net short position in the currency.
IMM/FX
U.S. Commodity Futures Trading Commission data showed
speculators held a net short position of $33.989 billion
NETUSDALL= , up from $31.524 billion the week before and near
the highest level in almost 10 years. The flip side of that was a large net long positions in the
euro, which showed a slight increase last week to $27.922
billion EURNETUSD= .
"We think euro/dollar should find good long-term demand
below the 1.1600 area, but really require some better news on
the global recovery (effective lockdowns, vaccines, new
stimulus) before the euro/dollar rally fully resumes," ING said
in a note to clients.
Investors now look to the first U.S. Presidential debate on
Tuesday.
"Few people will be trying to bet on the election outcome.
At least they will wait until tomorrow's TV debate," said
Kyosuke Suzuki, director of forex at Societe Generale.
The New York Times reported on Sunday that President Donald
Trump paid little in income taxes in recent years, claiming
heavy losses from his business enterprises that offset hundreds
of millions of dollars in income. Meanwhile, worries are growing that the economic recovery is
slowing as many stimulus programmes have expired, curbing
consumer spending.
The week provides markets with more U.S. data on the health
of the world's biggest economy, including consumer confidence on
Tuesday, a manufacturing survey and consumer data on Thursday
and jobs data on Friday.
Elsewhere, the Turkish lira briefly dropped 1.6% to a record
low of 7.8000 per dollar TRYTOM=D3 .
The lira had enjoyed a rare bounce after an interest rate
increase late last week, but the gains faded amid scepticism
about how it would filter through into financial market rates.
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