* 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 JPY=EBS 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 =USD , as the greenback recovered somewhat after the euro reversed earlier gains.
The euro was last down 0.2% at $1.1844 EUR=EBS .
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. euro along with commodity-linked currencies such the Australian AUD=D3 , New Zealand NZD=D3 , and Canadian dollars CAD=D3 gained after positive Chinese data overnight.
China's industrial output accelerated and retail sales grew for the first time this year, beating analysts' forecasts. pushed the Chinese yuan to its highest since May 2019 against the dollar CNH=EBS , 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 (PA:SOGN).
"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. stocks were also higher on the day. .N
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. 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
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
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Chinese data bounce
https://tmsnrt.rs/35GhWZZ
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>