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FOREX-Election jitters, Trump health keep dollar in tight range

* Graphic: World FX rates in 2020 (Updates prices, adds commentary and chart)

LONDON, Oct 5 (Reuters) - The dollar index slipped on Monday and riskier currencies gained, as financial markets waited for news about U.S. President Donald Trump’s health and developments in fiscal aid talks in Washington.

Trump said on Friday he had tested positive for COVID-19, triggering investor flight to safer assets and a stock market sell-off, as the news added an extra layer of uncertainty to the Nov. 3 presidential elections.

But early during the Asian session, Trump made a surprise appearance in a motorcade outside the hospital where he is being treated, which helped improve risk appetite.

He could be discharged from the hospital today, according to his doctors.

The Australian dollar - a liquid proxy for risk - was up and the safe Japanese yen was down, suggesting an improvement in risk appetite, but the moves in the dollar were less clear-cut because there is no consensus on how the U.S. election’s outcome would affect the dollar.

“The jury is out. There isn’t a clear consensus on how the dollar should trade on this degree of political uncertainty in the U.S.,” said Jane Foley, senior FX strategist at Rabobank.

The dollar slipped against a basket of currencies, and was down 0.2% on the day at 93.658 at 1040 GMT.

The dollar rose 0.3% against the yen to 105.66 at 1042 GMT. Dollar-yen saw its sharpest fall in more than a month on Friday .

“FX traders cannot agree on how to interpret the recent news flow,” Ulrich Leuchtmann, Commerzbank’s head of FX and commodity strategy, said.

“The biggest issue for the FX market is: it is uncertain whether this has made the biggest risk of the U.S elections – a long political and legal battle about the result – any more or less likely,” he said.

“A battle of this nature is only likely if the contender Joe Biden wins,” he added. “That might have become more likely.”

Trump’s illness has not led to an outpouring of support for him beyond his core group of followers, as a majority of Americans think he could have avoided the infection if he had taken the virus more seriously, a Reuters/Ipsos poll showed.

Goldman Sachs analysts said in a note to clients they were holding off on recommending more dollar short positions, as they wait for more information about how Trump’s health will affect the election.

Investors are waiting for developments in talks in Washington about a coronavirus relief package after U.S. House Speaker Nancy Pelosi on Sunday reported progress in the discussions.

Rabobank’s Foley said that if progress is made on the coronavirus relief funds then that would provide a more clear-cut boost to markets’ risk appetite.

The Australian dollar was up 0.3% at 0.71815 at 1053 GMT , while the New Zealand dollar was flat on the day at 0.6647.

The Reserve Bank of Australia’s policy meeting and the Australian budget announcement are on Tuesday.

Coronavirus restrictions in Auckland will be lifted this week, New Zealand Prime Minister Jacinda Ardern said.

The euro was up 0.3% at $1.1755.

The safe haven Swiss franc rose to a 13-day high versus the dollar, lifted by Japanese tech firm NEC saying it will buy Swiss financial software company Avaloq Group AG.

At 1055 GMT, euro-Swiss was down 0.1% at 1.0773 .

The pound was a touch below $1.30, down 0.1% on the day .

Goldman Sachs is advising clients to buy sterling, as it says that a “thin” trade deal is likely to be struck between Britain and the European Union by early November.

In focus this week are the U.S. Federal Reserve’s meeting minutes due on Wednesday and European Central Bank meeting minutes on Thursday.

Flash estimates for annual euro zone inflation came in weaker than expected on Friday, raising pressure on the European Central Bank to increase its stimulus. (Reporting by Elizabeth Howcroft Editing by Tomasz Janowski and Bernadette Baum)