FOREX-Dollar softer as euro rises on Franco-German proposal for recovery fund

* Dollar slips as safe-haven demand stalls
* German investor morale improves -ZEW

(Updates to U.S. afternoon)
By Saqib Iqbal Ahmed
NEW YORK, May 19 (Reuters) - The U.S. dollar fell against
the euro on Tuesday as the common currency added to Monday's
gains on a Franco-German proposal for a fund that would offer
grants to European Union regions and sectors hit hardest by the
coronavirus pandemic.
Encouraging results from the trial of a vaccine for COVID-19
reduced demand for safe havens and the greenback rose to a near
one-month high against the Japanese yen. JPY=EBS .
Germany and France, whose agreements usually pave the way
for broader EU deals, proposed that the European Commission
borrow 500 billion euros ($550 billion) on behalf of the whole
EU. The Commission is expected to outline their proposal before
a European summit scheduled for May 27.
The euro rose 0.08% against the greenback at $1.09235, on
pace for a two-day gain of about 1 percent.
"The Franco-German proposal represents a material step
forward towards harnessing joint fiscal capacity to provide
sustained fiscal stimulus to support the economic recovery,"
said Lee Hardman, currency analyst at MUFG.
The common currency was also supported by a survey showing
German investor sentiment improved much more than expected in
May as concerns eased over the impact of the coronavirus
pandemic on Europe's largest economy. The greenback found little support from data showing U.S.
homebuilding dropped by the most on record in April.
The dollar, which draws safe-haven flows when risk appetite
falls, has softened as investors took heart from encouraging
early-stage data for a potential coronavirus vaccine.
"The USD is a safe haven just like the CHF or JPY and it was
safe havens under pressure from yesterday morning straight
through to now," said Brad Bechtel, global head of FX at
Jefferies.
Governments reducing restrictions has also helped investors
grow optimistic that economies could soon return to normal.
On Tuesday, U.S. President Donald Trump said he will sign an
executive order directing federal agencies to eliminate
"unnecessary regulations that impede economic recovery."
The Australian AUD=D3 and New Zealand dollars NZD=D3
were stronger on the day amid progress on reopening the global
economy and vaccine optimism. Against the Japanese yen, which tends to draw investors
during times of geopolitical or financial stress, the dollar
rose 0.37% to a near one-month high.
The pound GBP=D3 rose 0.39% against the dollar, a small
recovery relative to its recent seven-week lows. Sterling is
held down by Brexit risks and speculation about negative rates.
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Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
U.S. dollar gains on safe-haven yen as risk sentiment improves
https://tmsnrt.rs/3fYwcjD
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