FOREX-Dollar retreats for third day on U.S. data, stimulus hopes


    * U.S. stimulus-driven hopes weigh on dollar
    * ECB keeps rates steady; Lagarde warns of more economic downside
    * Norwegian crown rises on Norges Bank's plans of a 2022 rate hike  
    * Bitcoin slumps as investors fear tighter regulation under Biden
    * Sterling at fresh 2-1/2-year high vs dollar
    * Graphic: World FX rates

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 21 (Reuters) - The dollar fell for a third straight session on Thursday, with investors
seeking out higher-yielding currencies, as a slew of better-than-expected U.S. data and continued optimism
about a massive stimulus package spurred hopes of a recovery in the world's largest economy.
    The euro, on the other hand, gained versus an overall weak dollar, even as European Central Bank
President Christine Lagarde warned about a renewed surge in COVID-19 infections and the prospect of
prolonged restrictions that could challenge the region's economic outlook.
    The ECB, which kept interest rates steady on Thursday, also pledged to provide more support for the
economy if needed.
    The FX market showed little reaction to Lagarde's comments, as market participants continued to focus
on what seemed like an improving global economic outlook and a nearly $2 trillion U.S stimulus package
proposed by new Democratic President Joe Biden's administration. 
    On Thursday, U.S. data showed an economy slowly getting some traction, with slightly
better-than-expected initial jobless claims, upbeat housing starts data, and a higher factory index for
the mid-Atlantic region. 
    "Across asset markets, optimism about growth is high and I think it's appropriate," said Anujeet
Sareen, global fixed income portfolio manager at Brandywine Global Investment Management in Philadelphia. 
    "We see the dollar going lower because global growth will get better, the trade balance is
deteriorating, and the Federal Reserve is going to keep its easy monetary policy," he added.
    The dollar typically loses out against its major peers in times of global expansions, when investors
are inclined to take on more risk.
    In afternoon trading, the dollar index fell 0.2% to 90.19, after touching a nearly one-month
high of 90.956 on Monday.
    The euro gained 0.5% against the dollar to $1.2159, rising as well versus the yen to 125.89
    The greenback also dropped versus currencies tied to commodity prices such as the Australian,
Canadian and New Zealand dollars.
    The Norwegian crown rose 0.5% against the dollar to 8.4185  after Norway's central bank
struck a hawkish tone on Thursday, saying it expects to raise rates early next year as the economy
recovers from the coronavirus pandemic.
    Sterling likewise set a fresh 2-1/2-year high against the dollar and a new eight-month peak
against the euro on hopes Britain's brisk pace of COVID-19 vaccinations would lead to a
relatively quicker rebound in economic growth.
    Many analysts expect the dollar to continue its downtrend, which saw it lose nearly 7% in 2020.
    That said, Wells Fargo's Nelson thinks the dollar is due for a reversal from its current weak trend in
the coming weeks.
    "There is an underappreciation of how difficult it would be for Biden to come in and have another $2
to $3 trillion out there in spending approved," Nelson said.
    In the cryptocurrency market, bitcoin slumped nearly 11% to $31,757, retreating further
from record highs, with traders citing fears of tighter U.S. regulation.
    Currency bid prices at 1:58PM (1858 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Dollar index                 90.1620        90.4100     -0.27%         +0.00%      +90.4540    +90.0430
 Euro/Dollar                  $1.2155        $1.2106     +0.41%         -0.51%      +$1.2174    +$1.2106
 Dollar/Yen                   103.5300       103.5500    +0.00%         +0.25%      +103.6600   +103.3500
 Euro/Yen                     125.85         125.33      +0.41%         -0.84%      +125.9600   +125.3300
 Dollar/Swiss                 0.8857         0.8898      -0.46%         +0.12%      +0.8899     +0.8849
 Sterling/Dollar              $1.3711        $1.3660     +0.38%         +0.37%      +$1.3745    +$1.3656
 Dollar/Canadian              1.2632         1.2635      +0.00%         -0.78%      +1.2646     +1.2591
 Aussie/Dollar                $0.7754        $0.7747     +0.09%         +0.80%      +$0.7782    +$0.7742
 Euro/Swiss                   1.0766         1.0768      -0.02%         -0.38%      +1.0786     +1.0757
 Euro/Sterling                0.8864         0.8864      +0.00%         -0.82%      +0.8872     +0.8831
 NZ                           $0.7190        $0.7170     +0.28%         +0.13%      +$0.7222    +$0.7173
 Dollar/Norway                8.4195         8.4900      -0.48%         -1.60%      +8.4865     +8.4010
 Euro/Norway                  10.2360        10.2810     -0.44%         -2.21%      +10.2920    +10.2138
 Dollar/Sweden                8.2915         8.3383      -0.25%         +1.16%      +8.3530     +8.2651
 Euro/Sweden                  10.0810        10.1065     -0.25%         +0.04%      +10.1115    +10.0570
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis and Hugh Lawson)


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