* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By David Henry and Saikat Chatterjee
NEW YORK/LONDON, Feb 2 (Reuters) - The dollar rose to two-month highs against the euro on Tuesday as
markets saw a widening disparity between the strength of U.S. and European economic recoveries from the
coronavirus pandemic.
Moves in Washington toward more stimulus spending and progress with vaccinations in the United States
contrasted with European lockdowns and expectations for a steepening decline in euro zone GDP, despite
data on Tuesday that showed less of a contraction in the fourth quarter than had been anticipated.
Against the dollar, the euro EUR=EBS was trading at $1.2030 at mid-morning in New York, down almost
to an early December low, and off 0.24% for the day as well as down 1.53% for the year.
"Growth differentials are taking a toll on the euro and adding to the traction that we've seen for the
U.S. currency this year," said Joe Manimbo, senior market analyst at Western Union Business Solutions.
"Europe might be about a year behind the U.S. in terms of a full recovery," he said.
The dollar index =USD gained 0.27% despite further gains for global stocks.
Initial European Union estimates showed the euro zone economy contracted less than expected in the
fourth quarter of 2020, which was marked by pandemic-induced lockdowns. But the economy appears headed for
another, probably steeper decline in the first quarter of this year. Those concerns were amplified after retail sales in Germany, Europe's biggest economy, plunged by more
than forecast in December, according to data on Monday.
"Things are looking even more depressing here," Commerzbank strategists said in a daily note.
Supporting the dollar on Tuesday were signs that the Democratic-led U.S. House of Representatives was
prepared to take the first step forward on President Joe Biden's $1.9 trillion COVID-19 relief package
with a key vote expected to fast-track the measure even in the face of Republican opposition. dollar has also benefited from a massive bout of short-covering, especially against the yen, where
hedge funds had racked up their biggest short bets against the greenback since October 2016.
Against the yen, the dollar JPY=EBS hovered above 105 yen for the first time since mid-November.
Many see the dollar's rebound since early last month as a correction after a relentless decline - the
dollar index lost almost 7% in 2020 - on expectations of a global recovery from the pandemic with massive
fiscal spending and continued ultra-easy monetary policy.
However, some like Claire Dissaux, head of strategy at Millennium Global, remain cautious on the
dollar, citing the relative appeal of the valuation of European assets compared with U.S. markets.
Elsewhere, the Australian dollar pared gains after the country's central bank said it would extend its
quantitative easing programme to buy an additional $100 billion of bonds, a decision that many market
players thought would wait until next month. The Aussie last stood at $0.7575 AUD=D3 , down 0.6% for the day.
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Currency bid prices at 10:14AM (1514 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index =USD 91.2040 90.9720 +0.27% 1.341% +91.2830 +90.8050
Euro/Dollar EUR=EBS $1.2030 $1.2060 -0.24% -1.53% +$1.2088 +$1.2020
Dollar/Yen JPY=D3 105.1000 104.9150 +0.20% +1.77% +105.1650 +104.9000
Euro/Yen EURJPY= 126.44 126.56 -0.09% -0.38% +126.8200 +126.3200
Dollar/Swiss CHF=EBS 0.8985 0.8969 +0.18% +1.56% +0.8995 +0.8947
Sterling/Dollar GBP=D3 $1.3621 $1.3662 -0.32% -0.32% +$1.3709 +$1.3611
Dollar/Canadian CAD=D3 1.2847 1.2858 -0.07% +0.90% +1.2869 +1.2785
Aussie/Dollar AUD=D3 $0.7575 $0.7622 -0.60% -1.52% +$0.7661 +$0.7564
Euro/Swiss EURCHF= 1.0810 1.0818 -0.07% +0.03% +1.0832 +1.0800
Euro/Sterling EURGBP= 0.8831 0.8825 +0.07% -1.19% +0.8837 +0.8796
NZ NZD=D3 $0.7143 $0.7158 -0.22% -0.54% +$0.7192 +$0.7136
Dollar/Dollar
Dollar/Norway NOK=D3 8.6250 8.6000 +0.40% +0.55% +8.6495 +8.5595
Euro/Norway EURNOK= 10.3821 10.3770 +0.05% -0.81% +10.4045 +10.3307
Dollar/Sweden SEK= 8.4350 8.4253 -0.15% +2.91% +8.4465 +8.3931
Euro/Sweden EURSEK= 10.1480 10.1628 -0.15% +0.71% +10.1720 +10.1370
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World FX rates https://tmsnrt.rs/2RBWI5E
USD positions https://tmsnrt.rs/36zTIAb
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