* Sentiment drives Aussie to 10 week high
* Weak inflation keeps the pressure on the pound
* PMI data from 0730 GMT eye
* Graphics: World Currency Rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, May 21 (Reuters) – The dollar suffered heavy losses on Thursday, and riskier currencies held gains as investors looked for a clear recovery from the COVID-19 pandemic, pulling off diabolical forecasts and rising Sino-U.S. excitement.
In bullish night trading, the risk-sensitive Australian dollar broke free of two-month rangebound moves to hit a ten-week high of $ 0.666. The Kiwi hit a ten-day peak of $ 0.6157 and both seemed ready for further gains.
“I think they might want to move on,” said Westpac FX analyst Imre Speizer.
“It’s a big rally and it’s not over yet,” he said. “The trend is clearly still upward for equities, and currencies mostly follow, though not as strongly.”
The S&P 500 has risen by around 35% from its lowest in March, and the Australian dollar has risen approx. 20% since then.
Both Aussie and Kiwi were lower in the morning trade, but movements were easy as markets await a speech from Australia’s central bank governor at. 0230 GMT and purchasing manager surveys in the UK, Europe and USA later.
Japan’s index of flash buying managers on Thursday showed that production activity dropped again in May.
Overnight, dealers interpreted the U.S. economic outlook. The Federal Reserve meeting minutes from April were likely to involve more stimulus and push stocks to higher.
“Almost everywhere, policy makers continue to emphasize that whatever resources are required will be made available,” ANZ analysts said in a note Thursday.
The euro hit the three-week high, the Swiss franc the two-week high and the Chinese yuan the one-week high, while the new market currencies also rose.
In Asia, the euro was last just below this peak of $ 1.0975, and the dollar was higher on the Japanese yen to 107.68.
The yuan was constant at. 7,1067 in offshore trade, even as diplomatic tensions between China and Australia simmered, and after the United States took new aim at Beijing’s handling of coronavirus on Wednesday.
U.S. Secretary of State Mike Pompeo called the $ 2 billion that Beijing has pledged to fight the pandemic “mind against the costs they have imposed on the world.”
The exception to the broad dollar weakness was the British pound, which remains under pressure after inflation data prompted more speculation the Bank of England would lower its interest rate below zero.
“(It) keeps the debate about negative rates alive and kicking,” said Kit Juckes, macro strategist at Societe Generale.
“Poor old sterling,” he said. “There is clearly a better case for shorts in sterling / yen than the euro / yen now, and even more in being short sterling / Aussie as well as sterling / yen gives the low risk of malice and move higher in resource prices.” (Reporting by Tom Westbrook; Editing by Sam Holmes)