Dollar softer as sentiment recovers on vaccine hopes and deals

TOKYO (Reuters) - The dollar dipped against riskier currencies on Tuesday as hopes for a COVID-19 vaccine and big corporate deals improved investor appetite for assets such as the yuan and the euro.

FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration

The dollar index =USD dipped to 93.029, slipping further from a one-month high of 93.664 touched last Wednesday, with its low last week of 92.695 seen as an immediate support.

The euro inched up to $1.1867 EUR=, having gained for four straight sessions until Monday.

Against the safe-haven yen, the dollar traded at 105.73 yen JPY=, having touched a two-week low of 105.55 yen on Monday.

Helping sentiment, AstraZeneca AZN.L resumed British clinical trials of its COVID-19 vaccine, one of the most advanced in development while Pfizer Inc PFE.N and BioNTech SE 22UAy.F proposed expanding their Phase 3 COVID-19 vaccine trial.

“It was uplifting that Pfizer has made clear a target of vaccines. As risk assets bounced back, the dollar has lost momentum,” said Kyosuke Suzuki, director of forex at Societe Generale.

Wall Street shares bounced back also as several multi-billion dollar deals -- including Nvidia's NVDA.O purchase of chip designer Arm and a deal between Oracle ORCL.N and China's ByteDance on TikTok -- lifted confidence.

The British pound bounced back to $1.2851 GBP=D4, following a fall of 3.66% last week, showing limited reaction after the UK government won an initial Parliamentary vote on its controversial bill to violate the Brexit deal with the European Union.

Still, traders said the currency looks vulnerable as the EU warns British Prime Minister Boris Johnson’s bill would collapse trade talks and propel the United Kingdom towards a messy Brexit.

Elsewhere, the offshore Chinese yuan hit a 16-month high of 6.8053 yuan per dollar on Monday and last traded at 6.8098 CNH=.

China’s retail sales and industrial output data for August due later in the day is its immediate focus.

The yuan's strength helped to lift MSCI emerging market currency index .MIEM00000CUS to a six-month high.

The Australian dollar slipped 0.2% to $0.7270 AUD=D4, as odds narrowed for further monetary policy easing by the country's central bank.

Traders also look to central bank policy meetings in the United States on Wednesday and in Japan and Britain on Thursday.

In particular, this week’s Federal Reserve meeting will be its first since Chairman Jerome Powell unveiled a shift toward greater tolerance of inflation, effectively pledging to keep interest rates low for longer.

Projections from Fed policymakers that inflation will remain below 2% in their economic forecasts, to be extended to 2023 this time, could strengthen expectations that interest rates will stay low for a long period of time, analysts say.

Reporting by Hideyuki Sano; Editing by Sam Holmes