FOREX-Dollar holds gains as virus woes hurt euro and sterling

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Dollar holds strong gains against European currencies
* Response to second wave of virus rattles investors
* U.S. political uncertainty to limit dollar's upside
* Kiwi in focus before central bank meeting

By Stanley White
TOKYO, Sept 23 (Reuters) - The U.S. dollar held onto gains
against major currencies on Wednesday, supported by positive
U.S. economic data and concerns about a second wave of
coronavirus infections in Europe and Britain.
The New Zealand dollar is in focus before a meeting later on
Wednesday where the country's central bank is expected to leave
its official cash rate at record lows and update its assessment
of the economic outlook. The greenback is likely to continue to grind higher in the
short term as the coronavirus rattles sentiment in Europe, but
uncertainty about this year's U.S. presidential election means
the dollar could be prone to more volatile swings.
"Some people are betting for more dollar strength against
the euro, which looks overvalued," said Masafumi Yamamoto, chief
currency strategist at Mizuho Securities in Tokyo.
"The picture in Europe has completely changed, because the
economic recovery is stalling and there is a second wave of the
virus, but I'm also worried about U.S. politics."
The dollar was quoted at $1.1708 per euro EUR=D3 on
Wednesday in Asia, close to a two-month low hit in the previous
trading session.
The pound GBP=D3 bought $1.2744, near the lowest since
late July, after British Prime Minister Boris Johnson unveiled
new restrictions on business activity to tackle a second wave of
the coronavirus. The dollar was quoted at 0.9198 Swiss franc CHF=EBS ,
holding onto a 0.6% gain from Tuesday.
The U.S. currency was little changed at 105.06 yen JPY=D3 .
On Tuesday the greenback was bolstered by data showing U.S.
home sales surged to their highest level in nearly 14 years in
August, but comments from a prominent Federal Reserve official
sent mixed signals. The U.S. economy risks a longer, slower recovery and
"recessionary dynamics" if Congress fails to pass an additional
fiscal stimulus package, Chicago Federal Reserve President
Charles Evans said on Tuesday. It is possible for the Fed to raise interest rates before
inflation starts to average 2%, Evans also said.
The dollar index =USD , which pits the dollar against a
basket of six major currencies, rose 0.4% on Tuesday to 93.975.
Sentiment for the euro has slowly weakened as investors grow
increasingly worried about surging coronavirus infections in
countries like France and Spain, raising the risk of lockdowns.
Many euro zone countries have reintroduced travel
restrictions, forcing airlines to scale back passenger services
after a relatively quick run up over the summer.
Traders in the pound and the euro are also worried that
Britain and the European Union will fail to agree a free trade
deal, which would cause additional economic strain.
The New Zealand dollar NZD=D3 was quoted at $0.6631 ahead
of policy decision by the country's central bank on Wednesday.
The Reserve Bank of New Zealand is expected to hold off on
further stimulus but traders want to see how the central bank
assesses the impact of the coronavirus.
The Australian dollar AUD=D3 held steady at $0.7172, but
the tone was slightly weak after a senior central banker on
Tuesday flagged the prospect of currency market intervention and
negative interest rates.