FOREX-Dollar holds gains on better U.S. outlook vs Europe

    * Graphic: World FX rates

    By David Henry
    NEW YORK, Feb 2 (Reuters) - The dollar rose to two-month highs against the
euro on Tuesday as markets saw the U.S. as likely to rebound sooner than Europe
from the coronavirus pandemic.
    The view was bolstered by moves in Washington toward more stimulus spending
that contrasted with European lockdowns and expectations for a decline in euro
zone GDP in the first three months of this year.
    Against the dollar, the euro was trading at $1.202 in the
afternoon in New York afternoon, down almost to an early December low, and off
0.32% for the day as well as down 1.61% for the year.
    "Growth differentials are taking a toll on the euro and adding to the
traction that we've seen for the U.S. currency this year," said Joe Manimbo,
senior market analyst at Western Union Business Solutions.
     "Europe might be about a year behind the U.S. in terms of a full recovery,"
he said.
     The dollar index gained 0.25% as U.S. and European stock indexes 
rose global stocks rose nearly 2% and oil jumped 2% to the highest levels in a
    Initial European Union economic readings showed the euro zone contracted
less than expected in the fourth quarter of 2020 but suggested that a steeper
decline in the first quarter of this year.
    Those concerns were amplified after retail sales in Germany, Europe's
biggest economy, plunged by more than forecast in December, according to data on
    "Things are looking even more depressing here," Commerzbank strategists said
in a daily note.
    Supporting the dollar on Tuesday were steps by Democrats in Congress toward
fast-track passage of U.S. President Joe Biden's $1.9 trillion COVID-19 relief
package even without Republican support.  
    The dollar has also benefited from a massive bout of short-covering,
especially against the yen, where hedge funds had racked up their biggest short
bets against the greenback since October 2016.
    Against the yen, the dollar hovered above 105 yen after briefly
crossing the level on Monday for the first time since mid-November. 
    Many see the dollar's rebound since early last month as a correction after a
relentless decline - the dollar index lost almost 7% in 2020 - on expectations
of a global recovery from the pandemic with massive fiscal spending and
continued ultra-easy monetary policy.
    Still, Manimbo said the dollar's move may be short-lived.
    "If the U.S. can start to see better labor market data, that would make for
a more convincing rally," he said.
    The next monthly U.S. payroll report is due on Friday.
    Currency bid prices at 3:02PM (2002 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Dollar index                 91.1900        90.9720     +0.25%         1.326%      +91.2830    +90.8050
 Euro/Dollar                  $1.2020        $1.2060     -0.32%         -1.61%      +$1.2088    +$1.2012
 Dollar/Yen                   105.0700       104.9150    +0.11%         +1.69%      +105.1650   +104.9000
 Euro/Yen                     126.29         126.56      -0.21%         -0.50%      +126.8200   +126.2700
 Dollar/Swiss                 0.8987         0.8969      +0.20%         +1.58%      +0.8995     +0.8947
 Sterling/Dollar              $1.3651        $1.3662     -0.07%         -0.07%      +$1.3709    +$1.3611
 Dollar/Canadian              1.2806         1.2858      -0.42%         +0.55%      +1.2869     +1.2785
 Aussie/Dollar                $0.7590        $0.7622     -0.41%         -1.33%      +$0.7661    +$0.7564
 Euro/Swiss                   1.0802         1.0818      -0.15%         -0.05%      +1.0832     +1.0800
 Euro/Sterling                0.8803         0.8825      -0.25%         -1.50%      +0.8837     +0.8796
 NZ                           $0.7155        $0.7158     -0.01%         -0.33%      +$0.7192    +$0.7136
 Dollar/Norway                8.6175         8.6000      +0.32%         +0.47%      +8.6495     +8.5595
 Euro/Norway                  10.3622        10.3770     -0.14%         -1.01%      +10.4045    +10.3307
 Dollar/Sweden                8.4161         8.4253      -0.45%         +2.68%      +8.4465     +8.3931
 Euro/Sweden                  10.1168        10.1628     -0.45%         +0.40%      +10.1720    +10.1115
 (Reporting by David Henry in New York and Saikat Chatterjee in London
Editing by Mark Heinrich)