FOREX-Euro, risk currencies lifted by ECB stimulus

* Euro hits 3-month high, on course for third week of gains
* Aussie touches $0.7, pound hits near 3-month high
* Safe-haven currencies soft on optimism over economic
recovery
* Hong Kong dollar at strong end of its dollar peg range
* U.S. jobless rate expected to soar near 20%
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, June 5 (Reuters) - The euro jumped to a three-month
high on Friday after the European Central Bank expanded its
stimulus more than expected to prop up an economy dealing with
its worst recession since World War Two.
The ECB's move supported appetite for riskier currencies,
lifting the Australian dollar to a five-month high and the
British pound above peaks hit during the last two months.
The central bank increased its emergency bond purchase
scheme by a bigger-than-expected 600 billion euros to 1.35
trillion and extended the scheme to mid-2021. The euro rose 0.25% to $1.1367 EUR= , its loftiest level in
almost three months. On the week, the single currency has risen
2.4% and is set to clinch a third straight week of gains.
Investor confidence in the currency has also grown after
Germany last month threw its weight behind the idea of a
European Union recovery fund, breaking away from its long-held
tradition to resist moves towards fiscal integration in the
currency bloc. "Recent actions by both the EU Commission, as well as the
ECB have reduced tail risks around the euro area economic
outlook," said Zach Pandl, co-head of global foreign exchange at
Goldman Sachs in New York.
"Europe's main challenge is its incomplete fiscal policy
architecture. However, European institutions are making
important changes to correct those weaknesses. And those include
the ECB's bond purchases as well as the EU recovery fund
proposal, which we think will go a long way towards improving
fiscal policy coordination in the euro area," he added.
Against the yen, the common currency changed hands at 124.43
EURJPY= , a 13-month high.
On the Swiss franc, another safe haven currency, it hit a
five-month high of 1.08645 EURCHF= .
The dollar index =USD is on course for its third
consecutive week of losses at 96.510, near its lowest in nearly
three months.
The greenback firmed to 109.33 yen JPY= , flirting with its
highest levels in two months.
Unwinding bets on safe-haven currencies reflected broad
optimism in financial markets as easing social distancing
restrictions supported economic recovery hopes.
The U.S. weekly jobless claims report showed the number of
Americans filing for benefits dropped below 2 million last week
for the first time since mid-March, even though that is still
three times larger than their peak during the global financial
crisis. Official U.S. employment data due later on Friday is
expected to show nonfarm payrolls fell by 8 million in May after
a record 20.54 million plunge in April.
The unemployment rate is forecast to rocket to 19.8%, a
post-World War Two record, from 14.7% in April.
"The market is risk-on despite historic levels of
joblessness. But everyone is still wary that the mood could
change and putting tight stop-loss orders. There is no strong
conviction," said Bart Wakayabashi, Tokyo Branch Manager of
State Street Bank.
The Australian dollar AUD=D4 , often seen as a risk proxy
in the currency market, rose 0.70% to $0.6993, briefly rising
above $0.70 for the first time since early January.
The Hong Kong dollar rose to 7.7500 per U.S. dollar, the
strong end of its 7.75-7.85 trading band, for the first time
since May 21, prompting the Hong Kong Monetary Authority to
intervene in the market. The gains came even amid rising worries about the future of
the city after China's move last month to impose national
security legislation.
Hong Kong police on Thursday pepper-sprayed some protesters
who defied a ban to stage candlelight rallies in memory of
China's bloody 1989 Tiananmen Square democracy crackdown.
(Editing by Sam Holmes and Jacqueline Wong)