By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The U.S. dollar slipped on Tuesday as investors took some profits after the previous session's gains that also saw a sell-off in equities, while worries persisted about a second coronavirus wave and uncertainty ahead of the U.S. election.
The greenback fell against the currencies that benefit mostly from higher risk appetite such as the euro, sterling, and commodity-linked currencies.
Monday saw the steepest stock market sell-off in a month and a bond rally, but foreign exchange market activity has remained relatively muted, with price moves on Tuesday limited.
"The movements and swings are going to continue and it's anxiety and angst overall in markets about the election," said Juan Perez, currency trader at Tempus Inc. in Washington. "You're going to see the dollar go up and down and be in roller-coaster mode in the next six or seven days."
Polls give Democrat Joe Biden a solid lead over U.S. President Donald Trump in the upcoming presidential election, but the contest is much tighter in battleground states that could decide the outcome.
That said, analysts warned investors were clearly cautious after the United States, Russia and France all hit new daily records for COVID-19 infections. They said prices were not moving much because of a reluctance to build positions before the election on Nov. 3.
At the same time, Trump acknowledged on Tuesday a coronavirus economic relief deal would likely come after the election, with the White House unable to bridge differences with fellow Republicans in the U.S. Senate as well as congressional Democrats.
"The uncertainty in the economic outlook has not changed one bit," said Edward Moya, senior market analyst at OANDA in New York,
After initially falling, the euro was little changed at $1.1810 <EUR=EBS> in afternoon trading.
The dollar index, which measures the greenback against a basket of major currencies, weakened 0.1% to 92.93 <=USD>.
The greenback fell 0.4% versus the yen to 104.47 yen <JPY=EBS>, and was slightly down against the Swiss franc at 0.9075 franc <CHF=EBS>.
The usually risk-sensitive Australian <AUD=D3>, Canadian, and New Zealand dollars <NZD=D3> gained versus the greenback.
The yuan initially weakened against the dollar after Reuters reported that China's central bank had neutralised the counter-cyclical factor in its daily yuan midpoint fixing in a move to let the fixing more closely reflect actual market shifts.
The move is typically positive for the dollar, said Stephen Innes, chief market strategist at online brokerage Axi.
"Such a move means dollar/yuan should generally fix higher. The removal of the element would imply greater FX flexibility."
The dollar was last flat at 6.701 yuan <<CNH=EBS>.
The European Central Bank, meanwhile, convenes on Thursday for its monetary policy meeting, but analysts say market reaction will be limited.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Mark Heinrich)