FOREX-Euro hovers near 4-month peak as market looks to EU summit

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, July 20 (Reuters) - The euro hovered near four-month
highs against the dollar on Monday as investors held on to hopes
that European leaders would break a deadlock and hammer out an
economic rescue deal as their marathon summit reached a record
length.
The euro changed hands at $1.1439 EUR= , just below a
four-month high of $1.1452 touched on Wednesday.
EU leaders were at an impasse over a proposed 750 billion
euro ($858.30 billion) recovery fund, which is supposed to be
raised on behalf of them all on capital markets by the EU's
executive European Commission. That would be a historic step towards greater fiscal
integration for the union, but a group of "frugal" wealthy north
European states were pushing for a smaller fund and seeking to
limit how payouts are split between grants and repayable loans.
A source said 350 billion euros on grants was the maximum
acceptable for the camp of thrifty northerners, compared to 400
billion seen as the bare minimum by many others, including
Germany and France. Diplomats said it was possible that they would abandon the
summit and try again for an agreement next month.
But market players expect them to reach a deal in the future
even if they fail to do so this time.
"I don't know what to expect from the summit. But even if
there is no agreement, the impact will be limited given the euro
appears to have a fairly strong momentum these days," said Yukio
Ishizuki, senior strategist at Daiwa Securities.
The dollar is broadly weak as investors maintained strong
risk appetite, betting on more stimulus not just from Europe but
also the United States.
The dollar index USD= stood at 95.949, near three-month
low of 95.716 touched last month.
A battle in the U.S. Congress over a new coronavirus-aid
bill began late last week as Republicans and Democrats pushed
for their own agenda. The Republicans want the upcoming coronavirus aid bill to
cost no more than $1 trillion while leading Democrats have
pledged to fight for much more - in the range of the $3 trillion
bill.
"We see more political pressure on the Republicans to
compromise on Democratic objectives because Republicans are
trailing badly in polls... Senate Republicans are not in a
position to hold back stimulus," wrote Steven Englander, head of
global FX strategy at Standard Chartered Bank New York branch in
a report.
Expectations of more government spending have offset worries
about rising coronavirus cases in the United States as well as
fears over deteriorating U.S.-China relations.
The Japanese yen JPY= was little changed at 107.07 per
dollar JPY= .
It showed no reaction to Japan's trade data that showed
exports plunged 26% from a year earlier in June, worse than
expected. Elsewhere, the British pound traded flat at $1.2570 GBP=D4
while the Australian dollar changed hands at $0.6999 AUD=D4 .
The offshore Chinese yuan traded at 6.9889 per dollar
CNH= , a tad below last week's four-month peak of 6.9806.
($1 = 0.8738 euros)