FOREX-Souring sentiment lifts dollar, knocks risk currencies

* Commodity currencies hit multi-week lows
* Receding risk sentiment leaves dollar winner
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, Jan 28 (Reuters) - Riskier currencies such as the
commodity-linked Australian dollar, Canadian dollar and the
Norwegian crown fell to multi-week lows against the U.S. dollar
on Thursday, as souring risk sentiment in global markets boosted
the greenback.
Falling stock markets in the United States on Wednesday, in
Asia overnight, and in Europe on Thursday contributed to a shift
in sentiment. .EU .N
By 1138 GMT, the dollar edged 0.05% higher against a basket
of currencies. =USD
It gained against the Aussie AUD=D4 , which lost as much as
0.8% to 75.92 U.S. cents, its lowest level against the buck
since Dec. 29.
The neighbouring New Zealand dollar, or Kiwi - fell half a
percent to 71.22 U.S. cents. NZD=D4
The Canadian dollar, or 'loonie', hit its lowest levels in a
month, weakening to as much as 1.286 per U.S. dollar. CAD=
Norway's crown slumped to its lowest in five weeks at 8.7286
per dollar, falling as much as 0.8% in London trade. NOK=
Analysts note that some of the optimism around vaccines
fuelling a recovery in the global economy has evaporated, given
that several countries, especially some in Europe, have been
slow to roll them out and have faced problems doing so.
The European Union, which is far behind the United States,
China and Britain in deploying a vaccine, demanded AstraZeneca
spell out how it would supply the bloc with reserved doses of
COVID-19 vaccine from plants in Europe and Britain. "The story of weakness in the European recovery continues,"
said Lars Sparresø Merklin, senior analyst at Danske Bank.
"A shortfall in vaccines is now at centre stage and risk
aversion to European assets from earlier in the week has spread
to global assets. The USD has been the natural winner."
There were also expectations of more dour economic news,
with data expected to show the U.S. economy likely contracted at
its sharpest pace since World War Two in 2020 as COVID-19.
The Commerce Department's snapshot of fourth-quarter gross
domestic product on Thursday is also expected to show the
recovery from the pandemic losing steam as the year wound down
amid a resurgence in coronavirus infections and exhaustion of
nearly $3 trillion in relief money from the government.
The Federal Reserve on Wednesday left its benchmark
overnight interest rate near zero and pledged to continue
injecting money into the economy through bond purchases, noting
that "the pace of the recovery in economic activity and
employment has moderated in recent months."
Despite the rise in the dollar however, analysts still
remain bearish on the currency.
"Market noise may persist a bit longer, but we remain
positive on risk assets overall and bearish USD over time, with
the Fed as an important driver," strategists at CitiFX said in a
note to clients.
Across the pond, the euro hovered around the $1.21 mark,
last down 0.1% on the day EUR=EBS after hitting its lowest in
over a week against the dollar on Wednesday.
European Central Bank (ECB) policymakers have stepped up
their mentions of the euro in recent weeks, with the most recent
comments indicating that the ECB could even cut its deposit rate
to check the strength of the continent's shared currency.
"We don't expect the recent verbal interventions to do much
damage to the euro as (a) the market is already pricing c.70%
probability of a 10basis point rate cut within a year, and (b)
there is not much else the ECB can do beyond the already
partially priced-in rate cut," ING strategists said in a note.
Sterling fell 0.2% to $1.3664 GBP=D3 .

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