FOREX-Dollar pauses as caution returns to markets

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates pricing throughout)
By Iain Withers
LONDON, June 24 (Reuters) - The dollar paused on Wednesday
after two straight days of losses, as money markets tempered
hopes of a rapid global economic recovery from the coronavirus
pandemic.
The U.S. currency was broadly flat against a basket of
currencies =USD , after earlier gains of 0.3%, as risk
sentiment soured in trading in Europe. Selling pressure hit several major currencies, including
sterling and the euro, before easing, leaving both broadly
unchanged by early afternoon. EUR=EBS GBP=D3
The New Zealand dollar remained under pressure, down almost
1% after the country's central bank said the balance of economic
risks remains to the downside and that it is prepared to use
additional monetary tools as necessary. Analysts said caution was warranted given the risk of a
second wave of COVID-19 infections, despite improved economic
data, including the strongest rebound on record in German
business confidence, according to data on Wednesday.
"The risk of a second wave worldwide has not been banished
yet and can quickly push the FX market back into the old pattern
of `risk aversion is on the up, let's buy safe havens; i.e., the
dollar' – even under the assumption that the lockdowns imposed
in that case would probably be much less severe than the first
time round," Commerzbank analysts said in a note.
The dollar index is down around 1% this week on the
improving economic picture, with UK, euro zone and U.S. data
earlier in the week supporting riskier currencies at the expense
of the safe-haven dollar.
The International Monetary Fund will release revised global
growth projections in its World Economic Outlook update on
Wednesday (1300 GMT), giving traders a fresh idea of the extent
of the economic damage caused by the pandemic and the likely
pace of recovery.
The IMF's last forecasts in April predicted world GDP would
fall 3% in 2020.
Spiking coronavirus cases in the United States, Germany and
elsewhere are being closely watched.
"We expect over the coming couple of weeks as we get more
clarity on this, state governors will be in a better position to
decide how to proceed," RBC Capital Markets' chief U.S.
economist, Tom Porcelli, said of the U.S. cases.