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FOREX-Dollar heads for weekly gain as pandemic recovery stalls

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

    By Tom Westbrook
    SINGAPORE, Oct 16 (Reuters) - The dollar was headed for its
best week of the month on Friday, as surging coronavirus cases
and stalled progress toward U.S. stimulus had nervous investors
seeking safe assets.
    As fresh curbs to combat COVID-19 were introduced in Europe
and Britain, the world's reserve currency surged to a two-week
high of 93.910 against a basket of currencies. It held
just below that peak in Asian morning trade.
    London enters a tighter COVID-19 lockdown from midnight,
which with a curfew in Paris leaves two of Europe's largest
cities living under state-imposed restrictions.
    The U.S. Midwest is also battling record surges in new cases
as temperatures get colder, prompting authorities to set up a
field hospital in the suburbs of Milwaukee, Wisconsin, in case
of an overflow of patients from hospital wards.
    "Markets fear a slowdown in activity as new virus cases
rise," ANZ bank analysts Susan Kilsby and David Croy said in a
note.
    "The deterioration is evident everywhere across Europe,
which is a major blow to the recovery's momentum and reinforces
deflationary risks."
    Risk sensitive currencies were hit hardest, with the
Australian dollar dropping almost 1% on Thursday to a
more than two week low of $0.7057. It has lost 2% for the week,
weighed also by a dovish central bank speech.
    The kiwi fell by 1% on Thursday to $0.6577 and both
Antipodeans sat just above their troughs on Friday. The
Norwegian krone is nursing a 2.4% loss this week.
    The euro fell 0.3% against the dollar overnight and
has lost about 1% for the week so far as worries gather. The  
U.S. dollar has gained 0.8% against a basket of currencies so
far this week, its largest weekly rise since late September.
    Dollar demand pushed even the safe-haven yen lower on
Thursday, though the Japanese currency is up 0.2% for the week.
The yen was last steady at 105.38 per dollar.
    The lockdown worries driving the selloff come as hopes for
U.S. stimulus before the Nov. 3 election fade and as data shows
cracks emerging in the recovery.
    Weekly U.S. jobless claims rose by more than expected and
hit a two-month high last week, increasing concerns the pandemic
is causing lasting damage to the labour market. Some 25 million
Americans are on jobless benefits.
    "The data is consistent with the idea that the spread of
COVID-19 and removal of fiscal stimulus have seen a stalling of
the economic recovery," said NAB FX strategist Rodrigo Catril.
    Stimulus plans, meanwhile, are bogged down in a three-way
negotiation between the White House, Senate Republicans and
House Democrats.
    President Donald Trump said on Thursday that he was willing
to raise his offer of $1.8 trillion for a COVID-19 relief deal,
but the idea was nixed by Republican Senate Majority Leader
Mitch McConnell.
    Sterling was also heavily sold overnight, dropping more than
0.8% to $1.2891 on concerns about the obstacles keeping the
European Union and Britain from reaching a Brexit trade deal.
Sterling was last at $1.2902.
    The European Union has put the onus on Britain to compromise
on their new economic partnership or stand ready for trade
disruptions in less than 80 days.
    British Prime Minister Boris Johnson will respond and set
out his approach to the talks on Friday.
    
    ========================================================
    Currency bid prices at 8:16AM (016 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar                  $1.1705        $1.1707     -0.01%         +4.42%      +1.1711     +1.1702
 Dollar/Yen                   105.3750       105.4600    -0.10%         -3.00%      +105.4100   +105.3550
 Euro/Yen                     123.34         123.44      -0.08%         +1.14%      +123.4700   +123.2700
 Dollar/Swiss                 0.9146         0.9143      +0.04%         -5.48%      +0.9148     +0.9146
 Sterling/Dollar              1.2902         1.2899      +0.03%         -2.71%      +1.2908     +1.2897
 Dollar/Canadian              1.3226         1.3226      +0.01%         +1.82%      +1.3231     +1.3214
 Aussie/Dollar                0.7084         0.7095      -0.15%         +0.96%      +0.7097     +0.7082
 NZ                           0.6596         0.6597      +0.00%         -1.96%      +0.6603     +0.6597
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Volatilities 
Tokyo Forex market info from BOJ 

 (Reporting by Tom Westbrook; Editing by Sam Holmes)
  
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