* Euro/dollar, dollar/Japanese yen steady
* Sterling clings to gains made in previous session
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Olga Cotaga
LONDON, Oct 15 (Reuters) - The Australian dollar dropped to a one-week low after the head of the central bank hinted of a possible rate cut or bond purchases.
Overall, a risk-off environment kept the U.S. dollar supported and other major currencies on the defensive, apart from the British pound. Sterling held on to the gains it made the day before on signs of progress in Brexit talks.
The Reserve Bank of Australia is assessing whether buying longer-dated bonds would help the economy and considering an interest rate cut, Governor Philip Lowe said in a speech in sSydney The RBA intervenes to keep the three-year yield at 0.25% but doesn't control yields further out the curve.
Marshall Gittler, head of investment research at BDSwiss Group, said he expected the Aussie to weaken relative to other commodity currencies, particularly the Canadian dollar. "I think there's much more room for further loosening in Australia than in Canada."
Money markets 0#YIB are priced for a November rate cut and bond markets think the RBA could start buying further along the curve. Ten-year bond futures YTCc1 were up 8.5 ticks to their highest since April. AUD/
The Aussie dollar fell nearly 1% to a one-week low of 0.7096 per U.S. dollar AUD=D3 . It also fell against the New Zealand dollar and the Japanese yen by 0.5% and 0.8% respectively.
In Europe, France has imposed curfews coronavirus infections rise. Markets fear a new wave of lockdowns could stall the global recovery just as hopes for U.S. stimulus before the Nov. 3 election are fading. U.S. dollar index traded at 93.47 =USD , close to a one-week high, though most major currencies were steady in early European trading.
The euro was last at $1.1740 EUR=EBS and the U.S. dollar was 105.95 per Japanese yen JPY=EBS . Both currency pairs were trading flat.
"Investors' appetite remained subdued for another day as concerns over a delay in distributing a coronavirus vaccine and downbeat comments over a new US fiscal package continue to weigh on market sentiment," said Charalambos Pissouros, senior market analyst at JFD Group.
This week, COVID-19 vaccine clinical trials from two pharmaceutical companies got delayed after patients fell ill.
U.S. drug inspectors also uncovered quality-control problems at an Eli Lilly (NYSE:LLY) and Co LLY.N pharmaceutical plant that is ramping up to manufacture a COVID-19 drug. the British pound maintained gains made in the day before, amid hopes that Brexit talks will continue beyond this week, when European Union leaders meet in Brussels on Thursday and Friday for an EU summit. UK Prime Minister Boris Johnson had set a deadline of Oct. 15 for progress in the talks. was steady at $1.30 GBP=D3 and at 90.23 pence against the euro EURGBP=D3 .