FOREX-U.S. dollar slides to two-week low vs yen; commodity currencies up

* China's yuan surges to 16-month high on economic data
* Australian, New Zealand, Canadian dollars gain
* Fed decision looms, seen sticking to dovish stance
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Recasts, adds new comment, FX table, updates prices, changes byline, dateline; previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 15 (Reuters) - The dollar dropped to a two-week low versus the yen on Tuesday on
expectations the Federal Reserve will maintain its downbeat stance on the U.S. economy as it grapples with
the pandemic, and keep U.S. interest rates near zero for some time.
The Fed begins a two-day meeting on Tuesday and analysts expect the U.S. central bank to affirm its
current zero-interest-rate policy over the next three years.
"There's a possible dovish risk to the Fed meeting," said Edward Moya, senior market analyst, at OANDA
in New York. "And you'll probably find the dollar vulnerable leading up to the Fed announcement."
In late morning trading, the dollar fell 0.3% against the yen to 105.42, after earlier
sliding to a two-week low of 105.30 yen.
A break below 105.20 yen could pave the way for further technical selling, analysts said.
"The U.S. central bank will be wary of uncertainty the U.S. presidential election will bring with it
and wouldn't want to cause unnecessary turmoil in the financial markets," said Fawad Razaqzada, market
analyst, at ThinkMarkets.com in London.
The dollar index was slightly up on the day at 93.111, as the greenback recovered somewhat
after the euro reversed earlier gains.
The euro was last down 0.2% at $1.1844.
Earlier, the euro gained after the ZEW economic sentiment survey showed investor sentiment in Germany
rose in September, despite headwinds from Brexit and rising coronavirus infections.
The euro along with commodity-linked currencies such the Australian, New Zealand,
and Canadian dollars gained after positive Chinese data overnight.
China's industrial output accelerated and retail sales grew for the first time this year, beating
analysts' forecasts.
That pushed the Chinese yuan to its highest since May 2019 against the dollar, which was
last down 0.4% at 6.7808 yuan in the offshore market.
"China is an economic winner at this point in the pandemic," said Kit Juckes, head of FX strategy at
Societe Generale.
"There's a sense that the virus is less of a threat in China now, and also perhaps more widely the
market is looking for a more V-shaped global economic recovery."

The Australian dollar also rose after minutes of its central bank meeting showed no signs of a further
cut to record-low interest rates.
U.S. stocks were also higher on the day.
The positive sentiment in currency markets was also attributed to hopes for a COVID-19 vaccine.
British drugmaker AstraZeneca restarted its vaccine trial in Britain on Saturday though it remains on hold
in the United States.

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Currency bid prices at 10:44AM (1444 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1843 $1.1868 -0.21% +5.65% +1.1899 +1.1840
Dollar/Yen JPY= 105.4200 105.7200 -0.28% -3.16% +105.8100 +105.3100
Euro/Yen EURJPY= 124.89 125.42 -0.42% +2.39% +125.7600 +124.7600
Dollar/Swiss CHF= 0.9083 0.9083 +0.00% -6.15% +0.9088 +0.9052
Sterling/Dollar GBP= 1.2861 1.2844 +0.13% -3.00% +1.2925 +1.2816
Dollar/Canadian CAD= 1.3174 1.3174 +0.00% +1.45% +1.3186 +1.3134
Australian/Doll AUD= 0.7306 0.7288 +0.25% +4.06% +0.7342 +0.7268
ar
Euro/Swiss EURCHF= 1.0756 1.0774 -0.17% -0.88% +1.0787 +1.0754
Euro/Sterling EURGBP= 0.9207 0.9236 -0.31% +8.91% +0.9259 +0.9192
NZ NZD= 0.6718 0.6698 +0.30% -0.27% +0.6736 +0.6685
Dollar/Dollar
Dollar/Norway NOK= 9.0403 9.0344 +0.07% +2.98% +9.0527 +8.9902
Euro/Norway EURNOK= 10.7103 10.7250 -0.14% +8.87% +10.7458 +10.6885
Dollar/Sweden SEK= 8.7895 8.7614 +0.08% -5.97% +8.7981 +8.7415
Euro/Sweden EURSEK= 10.4122 10.4041 +0.08% -0.54% +10.4273 +10.3910


(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Elizabeth Howcroft in London; Editing by
Andrea Ricci)