* The dollar falls after a successful COVID-19 vaccine study
* Australian New Zealand dollars up as trade risk declines
* Swedish, Norwegian kroner inches to two months highs
* Graphics: World Currency Rates in 2019 http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, May 19 (Reuters) – The euro bounced back on Tuesday, propelled by a Franco-German proposal Monday on a fund that would offer grants to EU regions and sectors most affected by the coronary pandemic.
The single currency was also buoyed by a weaker dollar, which lost its appeal to port following encouraging results from the trial of a vaccine against COVID-19, which increased risky assets.
Germany and France, whose agreements usually pave the way for broader EU agreements, suggested that the European Commission borrow the € 500 billion ($ 546.90 billion) on behalf of the whole EU. The Commission is expected to outline their proposals for the fund before a European summit scheduled for 27 May.
The euro bought $ 1.0926 after rising to a two-week high of $ 1.0945 earlier. And the cost of betting against the dollar against the dollar in currency derivatives markets on Tuesday fell to the lowest since mid-March.
The single currency was 0.2% higher against the Swiss franc of 1.0622 after rising to an 11-week high the day before.
“The Franco-German proposal is a significant step toward leveraging the common fiscal capacity to provide sustained fiscal stimulus to support economic recovery,” said Lee Hardman, currency analyst at MUFG.
Measures of the implied volatility overnight rose to a three-week high of 9.10%, suggesting that traders expect greater moves than usual in the single currency on Tuesday.
The dollar fell 0.1% against a basket of currencies of 99.51, after touching a two-week low of 99.37 previously.
Moderna Inc’s experimental COVID-19 vaccine, the first tested in the United States, produced protective antibodies in a small group of healthy volunteers.
“The market’s positive response to the report is understandable, as finding a vaccine against COVID-19 is the search for the Holy Grail. It would return to normal at a much faster pace and significantly reduce long-term damage to the global economy,” Hardman.
As governments scale down the restrictions on lockdown, investors became optimistic that economies could soon return to normal.
Trade-sensitive currencies such as the Australian dollar rose to a three-week high of 0.66564. The New Zealand Dollar was last up 0.7% at 0.6076.
The Swedish and Norwegian kroner increased by 0.3% each to two-month highs.
Although in many places coronavirus infection rates have now dropped to levels low enough to allow factories and businesses to reopen, some concern remains because the outbreak is not under control.
($ 1 = 0.9142 euros) (Reporting by Olga Cotaga, Editing by Larry King)