* Dollar index falls after Trump's pro-stimulus comments
* Yuan surges after firmer central bank guidance
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
LONDON, Oct 21 (Reuters) - The dollar fell to a one-month
low on Wednesday after U.S. President Donald Trump boosted hopes
for a large fiscal stimulus package, prompting a wave of market
optimism that saw traders ramp up their bets on riskier
Lawmakers in Washington have been negotiating intermittently
since August, with Democrats arguing for a bigger package to
help manage the economic fallout from coronavirus.
Trump raised hopes for a breakthrough on Tuesday by saying
he was willing to accept a large aid bill, despite opposition
from his own Republican party. The comments sparked
some risk-on moves in currency markets.
"All in all, the chances of a stimulus bill being passed
still look rather thin and we doubt investors have high
expectations in these terms," ING strategists wrote in a note to
But a collapse in negotiations would not do serious damage,
they said, because investors still expect stimulus to be passed
after the U.S. elections, in the case of a Democrat victory.
"For now, the fact that the perceived probability of a
bi-partisan deal is increasing rather than decreasing may be
just enough to put a floor below risk assets and high-beta FX,
and USD could stay gently offered across the board," they said.
"This story may well remain the dominant driver for markets
for the rest of this week as both parties aim to reach a
potential deal by the weekend," they said.
At 0710 GMT, the dollar was down 0.3% against a basket of
currencies, at 92.801.
The riskier New Zealand and Australian dollars both
advanced, with the Kiwi up 0.6% and the Aussie up 0.5%
The Norwegian crown reached a one-week high of 9.196 versus
the U.S. dollar, and the Canadian dollar rose to its
strongest in more than six weeks, touching 1.3081 per dollar
The euro rose to a one-month high versus the dollar in early
trading and was up 0.3% at $1.18555 at 0723 GMT.
China's yuan surged, in both offshore and onshore trading,
led by firmer central bank guidance and recent data suggesting a
more sustained recovery in the world's second-largest economy.
The offshore yuan reached its strongest in two years versus
the U.S. dollar towards the end of the Asian session at 6.6278
before easing somewhat. By 0725 GMT, it was up 0.4% at 6.6374
"There are few US-China headlines recently which has somehow
encouraged the optimism towards the Chinese currency," wrote
Commerzbank FX and EM analyst Hao Zhou.
"For the short term, the momentum trading is likely to
dominate, if there is no clear setback from either economic and
geopolitical front. However, past lessons suggest that the
geopolitical tensions will come back at some point," he said.
(Reporting by Elizabeth Howcroft, editing by Larry King)