FOREX-Euro steadies in a big week for Europe's policymakers

* Graphic: World FX rates: http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, May 25 (Reuters) - The euro steadied around the
$1.09 level on Monday in a potentially big week for European
policymakers as they debate the outlines of a recovery fund
aimed at helping member nations.
Austria, Netherlands, Denmark and Sweden want loans from a
time-limited fund for nations struggling to recover from the
pandemic, rather than the grants proposed by France and Germany
last week for the European Union's coronavirus recovery plan.
The Franco-German plan sent the euro rallying above $1.10
last week before the much-expected counter proposal by the four
countries pushed it back below $1.09 EUR=EBS .
The rival proposals come before the European Commission's
own plans for the recovery fund on Wednesday and any watered
down proposals from the original plan would be perceived as euro
negative.
On the other hand, "if the Franco-German debt proposal
(miraculously) passes the test during the coming week, we reckon
that it would be a major euro positive event," Nordea
strategists said.
On Monday, the single currency steadied around $1.09 but
remained about 5% below a 2020 high of near 1.15 hit in early
March.
Elsewhere, the U.S. dollar erased earlier gains and edged
lower on the day though concerns about a growing standoff
between the United States and China over civil liberties in Hong
Kong kept sentiment subdued.
The greenback =USD , which tends to behave like a
safe-haven asset at times of market turmoil and political
uncertainty, was steady near a one-week high at 99.74.
The Australian dollar AUD=D3 , by dint of its strong trade
connections with China and the offshore yuan CNH=D3 , led
losers against the U.S. dollar.
More turbulence for U.S.-China relations is prompting some
investors such as UBS Wealth Management to hold a "defensive"
position in Hong Kong. "(The) larger risk for global investors
is what happens if it becomes further enmeshed in broader
relations," said Mark Haefele, its chief investment officer.
China's proposed national security legislation for Hong Kong
could lead to U.S. sanctions and threaten the city's status as a
financial hub, White House National Security Adviser Robert
O'Brien said on Sunday. With financial markets in Singapore, Britain and the United
States closed for public holidays on Monday, the weekend
developments hit risk aversion in broader markets in early
trade.
Sterling GBP=D3 was also on the back foot against both the
dollar and the euro as political pressure grew on British Prime
Minister Boris Johnson to fire senior adviser Dominic Cummings.
Cummings, the architect of the 2016 campaign to leave the EU
and widely considered to be Johnson's most influential
strategist, came under pressure after reports he travelled to
northern England from London during a nationwide lockdown in
March when his wife was ill with COVID-19 symptoms.

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FX positions https://tmsnrt.rs/2B0xGd5
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