FOREX-Dollar on defensive as U.S. stimulus hopes, Trump discharge boost risk sentiment

* Renewed hopes of U.S. stimulus support riskier currencies
vs USD
* Trump's return to White House spurs unwinding of risk-off
bets
* Aussie dollar looks to RBA, budget
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Oct 6 (Reuters) - The dollar was softer against
riskier currencies on Tuesday on rising optimism that U.S.
lawmakers could agree on new stimulus to blunt the economic
impact of the coronavirus.
Risk appetite also improved after U.S. President Donald
Trump left the hospital and returned to the White House
following treatment for COVID-19, a development viewed as
reducing political uncertainties in the near term.
"I think hopes of U.S. stimulus are the main driving force,"
said Masafumi Yamamoto, chief currency strategist at Mizuho
Securities.
"As for Trump's discharge, the impact is not clear-cut but
it is seen as positive for risk environment to the extent that
there are less worries about the White House getting caught in
complete chaos and unable to make decisions," he said.
The euro traded at $1.1792 EUR= , following a gain of 0.58%
on Monday.
The pound changed hands at $1.2990 GBP=D4 , tackling its
resistance around $1.30, despite concerns about a no-deal
Brexit.
The dollar advanced on the safe-haven yen to 105.66 yen
JPY= , staying near its highest levels in three weeks.
The dollar's index against a basket of six major currencies
=USD dropped to 93.381, touching its lowest level in two
weeks.
U.S. House Speaker Nancy Pelosi and Treasury Secretary
Steven Mnuchin spoke by phone for about an hour on Monday on
coronavirus economic relief and were preparing to talk again
Tuesday, continuing their recent flurry of activity working
towards a deal on legislation. White House Chief of Staff Mark Meadows said there is still
potential for an agreement among lawmakers in Washington on more
economic relief, and that Trump is committed to getting the deal
done. However, renewed efforts in Congress to reach an agreement
on relief funds for the pandemic-hit economy has been
complicated by the spread of the coronavirus among key policy
makers including Trump.
The president returned to the White House on Monday after a
three-night hospital stay for COVID-19 treatment, though White
House physician warned he may not be out of the woods yet.

"The market has been nervous about the possibility of a
contested election, but it appears Biden is widening the lead,
thus reducing the chance of markets not knowing the results for
a long time," said Yujiro Goto, chief currency strategist at
Nomura Securities.
"And while markets have thought there will be corporate tax
hikes if Democrats sweep both chambers as well as the president
.. that is being offset by the idea that there will be fiscal
stimulus," he added.
A "blue wave" election outcome would likely accelerate
dollar weakness, said Zach Pandl, co-head of global forex at
Goldman Sachs in New York.
"The former vice president would likely take a more
multilateral approach to foreign policy issues, and would be
less likely to surprise markets with tariff increases," Pandl
said, referring to Democrat presidential candidate Joe Biden.
In addition, a corporate tax hike would make U.S. stocks
less attractive, and fiscal stimulus tends to depreciate a
currency when it comes with high unemployment and low interest
rates, he added.
Among the currencies that are not included in the dollar
index, the offshore Chinese yuan maintained its firmness at
6.7281 per dollar CNH=D4 , having hit its highest level since
April last year on Monday.
The Australian dollar jumped 0.3% to $0.7205 AUD=D4 , after
the Reserve Bank of Australia kept interest rates on hold at
0.25% despite widespread expectations of a rate cut.
Currency traders are also focused on the government's annual
budget with Canberra widely expected to keep the fiscal tap open
for years to come.