FOREX-Dollar weaker as US fiscal stimulus hopes lift risk appetite

* Dollar falls vs most major currencies, except yuan and
Aussie
* Biden lead in polls also adds to dollar weakness
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Olga Cotaga
LONDON, Oct 6 (Reuters) - The dollar was on the defensive
against most currencies on Tuesday 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
electoral 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 down slightly at 93.39 =USD . It has fallen 1.2%
from a two-month high reached at the end of September, in
contrast with U.S. equity markets, which rose.
Euro/dollar was trading up 0.1% at 1.1792 EUR=EBS .
The British pound also rose 0.1%, to $1.2991 GBP=D3 , with
hopes that a Brexit deal can be reached pushing the currency
towards $1.30.
The dollar was 0.1% weaker versus the Japanese yen at 105.65
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 has 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 White
House physician warned he may not be out of the woods yet.
"The market has been nervous about the possibility of a
contested election, but it appears Biden is widening the lead,
thus reducing the chance of markets not knowing the results for
a long time," said Yujiro Goto, chief currency strategist at
Nomura Securities.
"And while markets have thought there will be corporate tax
hikes if Democrats sweep both chambers as well as the presidency
... that is being offset by the idea that there will be fiscal
stimulus," he added.
Among currencies that are not included in the dollar index,
the offshore Chinese yuan weakened 0.2% to 6.7296 per dollar
CNH=D3 , having hit on Monday its highest level 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 hands at 0.7150, down 0.4% on the day AUD=D3 .
Currency traders are also focused on the government's annual
budget, with Canberra widely expected to keep the fiscal tap
open for years to come.