* Euro strongest since mid-March, dollar weaker
* Aussie jumps 1.3%; Kiwi also rises strongly
* Hopes for U.S.-China relationship, factory data boost
sentiment
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, June 1 (Reuters) - The euro briefly hit its
strongest since mid-March on Monday and riskier currencies like
the Australian dollar rallied as investors looked to positive
signs from China's post-coronavirus economic recovery and hopes
for an easing in Sino-U.S. tensions.
Investors were relieved that U.S. President Donald Trump
made no move to impose new tariffs on China during a news
conference on Friday where he outlined his response to Beijing's
tightening grip over Hong Kong.
They were also encouraged by the Caixin/Markit Purchasing
Managers Index showing a marginal but unexpected improvement in
Chinese factory activity last month. The trade-sensitive Australian dollar AUD=D3 surged 1.3%
to a four-month high of $0.6765 to lead broader rises that put
the U.S. dollar at its weakest since March 16.
Against a basket of other currencies, the dollar was last
down 0.3% at 97.954 =USD .
The euro was also a big beneficiary of the dollar's decline,
rising 0.4% to $1.1154, its strongest since March 17.
ING analysts said the door to a weaker dollar had been
opened now that new U.S. measures imposed over Hong Kong had
proved less serious than feared and as OPEC+ looked set to
extend oil supply cuts, which will boost commodity-linked
currencies.
"The big question is whether we are just seeing the dollar
traversing a short-term range, or embarking on a more sizable
decline," they said.
"We had pencilled in a bigger dollar decline for the second
half of the year but will be alert to this trend emerging sooner
than we had expected."
Analysts said unrest in major U.S. cities against police
brutality was concerning and perhaps a pointer to a close-run
presidential election in November, but was unlikely to shift
short-term optimism about the U.S. economy. Sterling GBP=D3 rose 0.5% to a three-week high of $1.2414,
helped by Britain gradually moving out of lockdown.
The Chinese offshore yuan CNH=EBS rose marginally,
following Friday's relief rally on hopes for a softening in
Sino-U.S. tensions.
The New Zealand dollar added 0.8% to $0.6256 NZD=D3 , while
the Canadian dollar rose 0.5% CAD=D3 .
The Australian dollar is the standout gainer and is now up
more than 20% from March lows. It gained steadily through May as
the country brought coronavirus under control, while the price
of iron ore - Australia's top export - soared to record highs.
Some analysts said the Aussie may serve as a guide for
traders as other economies emerge from lockdown, although the
spread of the virus has been much more severe elsewhere, such as
in Italy and Britain.
"We're pretty optimistic about the Aussie this week," said
Commonwealth Bank of Australia FX analyst Joe Capurso.
"Market participants believe that the worst of the health
and financial and economic crises are now behind us ... and if
we're past the worst of it, then commodity currencies tend to do
well and the U.S. dollar tends to do poorly," he said.
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Australian dollar vs the U.S. dollar https://tmsnrt.rs/2yRqPBX
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