FOREX-Dollar steadies after falling on sharper risk appetite

* Yuan, Aussie, Yen, rise vs US dollar
* Pound still close to $1.30 on Brexit hopes
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates prices, adds comment)
By Olga Cotaga
LONDON, Oct 6 (Reuters) - The dollar stabilised on Tuesday
after weakening against most currencies in earlier trade, as
rising optimism that U.S. lawmakers could agree on new stimulus
to blunt the economic impact of the coronavirus dampened demand
for safer assets.
Risk appetite also improved after U.S. President Donald
Trump left hospital and returned to the White House following
treatment for COVID-19, a development viewed as reducing
political uncertainties in the near term.
The lead taken by Trump's presidential opponent Joe Biden in
polls ahead of next month's election is also seen as negative
for the U.S. currency.
"The increasing possibility of a "blue wave" (Democrat
control of the White House and Congress) that would open the
door for much-needed fiscal stimulus would be a welcome
development for risk assets and could undermine the U.S.
dollar," said Lee Hardman, currency analyst at MUFG.
An index which measures the dollar against a basket of
currencies was last flat at 93.49 =USD . It has fallen around
1% from a two-month high reached at the end of September, in
contrast with U.S. equity markets, which rose.
Euro/dollar was also flat at 1.1779 EUR=EBS . The British
pound fell 0.1%, to $1.2967 GBP=D3 , though hopes of a Brexit
deal kept the currency close to $1.30. The dollar was 0.2%
weaker versus the Japanese yen at 105.56 JPY=EBS .
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 on
Tuesday, continuing their recent flurry of activity working
towards a deal on legislation. White House Chief of Staff Mark Meadows said there was still
potential for an agreement among lawmakers in Washington on more
economic relief, and that Trump was committed to getting the
deal done. However, renewed efforts in Congress to reach an agreement
on relief funds for the pandemic-hit economy have been
complicated by the spread of the coronavirus among key
policymakers including Trump.
The president returned to the White House on Monday after a
three-night hospital stay for COVID-19 treatment, though the
White House physician warned he may not be out of the woods yet.
Deutsche Bank currency analyst George Saravelos said the
fiscal stimulus needed in the United States to fight the
coronavirus-induced economic downturn will be negative for the
U.S. dollar because the Federal Reserve is planning to remain
accommodative.
"Is more U.S. fiscal stimulus good or bad for the dollar? It
helps growth, of course. But the Fed is more important," he
said.
"It is clear that the Fed's new average inflation-targeting
strategy is explicitly designed to keep the curve very flat and
push front-end real yields as low as possible. That's why
post-COVID fiscal stimulus is going to be much more
dollar-negative than the Trump one," Saravelos added.
Among currencies that are not included in the dollar index,
the offshore Chinese yuan weakened 0.1% to 6.7280 per dollar
CNH=D3 , having hit on Monday its highest since April last
year.
The Australian dollar reversed the gains it made after the
Reserve Bank of Australia kept interest rates on hold at 0.25%,
despite widespread expectations of a rate cut. It was last
trading at 0.7150, down 0.4% on the day AUD=D3 .
Australia will spend A$4 billion over the next year to pay
businesses that hire those under the age of 35, Treasurer Josh
Frydenberg said on Tuesday, part of an ambitious plan to boost
jobs and growth.