FOREX-Dollar struggles amid Sino-U.S. tensions, coronavirus woes

* Euro storms toward $1.17 amid doubts over U.S. recovery
* Yen firm as Sino-U.S. tensions simmer
* Aussie, kiwi inch ahead as dollar slips
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, July 27 (Reuters) - The dollar began the week
under pressure from all corners as intensifying Sino-U.S.
tensions added to worries that the coronavirus resurgence in
United States could undermine the recovery in the world's
biggest economy.
In morning trade it fell to a four-month low against the yen
and a new 22-month trough on the euro EUR=EBS at $1.1699.
The Antipodean currencies also rose a little and against a
basket of currencies the dollar was at its lowest since
September 2018. .DXY
The lack of support for the greenback, even as tit-for-tat
consular closures marked the latest escalation in U.S.-China
tensions, is a shift for the dollar which has been closely
tracking global sentiment through the coronavirus crisis.
It also comes with a broad re-evaluation of the euro's value
after a landmark European agreement on a fiscal rescue package
just as cracks start to emerge in the U.S. labour market
rebound.
"The common factor is the ongoing decline in U.S. yields,"
said Ray Attrill, head of FX strategy at National Australia Bank
in Sydney. They have fallen as the bond market prices a slow
U.S. recovery, robbing the dollar of a dependable attraction.
"The message from the end of last week is that deterioration
in risk sentiment alone may not be enough to provide the dollar
with any kind of meaningful, durable support," Attrill said.
"I suspect it's going to take much more (deterioration in
sentiment) to really bring the dollar's reserve-currency
safe-haven characteristics back to the fore."
The Australian dollar AUD=D3 took advantage and edged
ahead in spite of a rise in local coronavirus cases, climbing to
$0.7120. The New Zealand dollar NZD=D3 rose 0.3% to $0.6657.
Both, however, remain below recent peaks and were under
pressure against the yen as the broader mood remained grim in
the shadow of rising infections and simmering geopolitical
tensions.
Staff of the U.S. consulate in Chengdu were making final
efforts to clear out ahead of a Monday deadline to shut the
outpost in response to the U.S. ordering China's Houston
consulate to close amid allegations of spying. Elsewhere, investors are also beginning to fret about U.S.
political deadlock over the next round of fiscal stimulus with a
month-end deadline looming to extend some unemployment benefits.
The White House and Senate Republicans reached an agreement
on the way forward over the weekend but it remains to be seen
whether it will be acceptable to Democrats in the House.
Last week a recovery in the U.S. job market unexpectedly
stalled, while purchasing manager surveys showed Europe's
recovery pulling ahead - adding to nerves about any letup in
U.S. stimulus.
"Watch the Swiss franc and Japanese yen as two hedges
against no political resolution," said Chris Weston, head of
research at Melbourne brokerage Pepperstone.
"Dollar/yen has found good support into 106, but a break
here and I am holding shorts for 104.50. I like selling strength
in both pairs."
The franc CHF= rose to a four-month high of 0.9186 per
dollar on Monday and is testing resistance at 0.9183. The yen
JPY=EBS , after moving sideways for two months, rose 0.4% to
105.65, its highest since mid-March.