* Australian dollar rises to 10-week high vs USD
* Sterling higher even as low UK inflation still a concern (New throughout, updates prices, market activity, comments to U.S. market open; new byline, changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, May 20 (Reuters) - The U.S. dollar fell to a more than two-week low against the euro as the common currency enjoyed a boost from the recently announced proposal for a common fund that could move Europe closer to a fiscal union as it tries to counter the economic hit from the coronavirus pandemic.
France and Germany have proposed a 500 billion euro ($543 billion) Recovery Fund to offer grants to regions and sectors hit hardest by the coronavirus pandemic and to allow borrowing by the European Commission on behalf of the whole EU.
The euro also found strength from survey data on Tuesday that showed German investor sentiment improved much more than expected in May.
“The euro is challenging yesterday’s highs vs the dollar as well as major peaks achieved in early May and April,” said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.
“There should be major technical resistance at these levels, but should the euro break higher, we could see prices not seen since March,” he said.
The euro was up 0.63% at $1.0992, its highest since May 1.
The U.S. dollar, which draws flows when investors shun risk, was broadly weaker on the day as investors clung to hopes of a recovery from a coronavirus-fueled slump.
The U.S. Dollar Currency Index, which measures the greenback’s strength against six major currencies, was down 0.52% at 99.04, on pace for its third straight day of losses.
The risk sensitive Aussie dollar rose 0.93% to a 10-week high against the U.S. currency.
Investors await the release later on Wednesday of the minutes from the April 29 FOMC meeting, which could shed light on the U.S. Federal Reserve’s thinking as it seeks to bolster the economy.
“Equity and currency markets will be particularly sensitive to any indications of further actions being discussed by the members. Additional measures could be supportive of stocks which could send the dollar lower,” said Manimbo.
Sterling was 0.15% higher against the U.S. dollar but clouds lingered over the pound after UK inflation fell below 1% to its lowest in nearly four years.
The Canadian dollar strengthened against its U.S. counterpart on Wednesday as hopes for global economic recovery supported equity markets and investors shrugged off domestic data showing deflationary pressures.
Reporting by Saqib Iqbal Ahmed; Editing by Lisa Shumaker