* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook and Scott Murdoch
SINGAPORE/HONG KONG, Jan 6 (Reuters) - The U.S. dollar steadied in Asia on Wednesday as traders looked to the outcome of a Senate election in Georgia to drive the next move in market sentiment.
The dollar had dropped through a major support level against the Japanese yen JPY= on Tuesday and it briefly fell to a fresh 10-month low of 102.60 yen on Wednesday before steadying.
The euro EUR= also rose past major resistance at $1.2310 to as high as $1.2328 in early Asia trade, its strongest since April 2018, before slipping back to $1.2281 as traders watched close early results from Georgia flow in.
The Australian and New Zealand dollars hung on to hefty gains to trade near multi-year highs, with the Aussie AUD=D3 a touch softer at $0.7745 and the kiwi NZD=D3 touching a new 32-month top before easing back to $0.7240.
Sterling GBP= was slightly softer at $1.3607.
The outcome of the runoff vote to elect two senators in Georgia will determine control of the U.S. Senate, although a final result is not expected before Wednesday morning in the United States - perhaps longer if it is close. they win both spots, Democrats will take control of the Senate and would be able to pass their legislative agenda, which could include higher taxes and more stimulus.
"The market reaction to the outcome will probably be dictated by what it is assumed to mean for fiscal policy, rightly or wrongly," said RBC Capital Markets currency strategist Adam Cole.
"If the Democrats do manage to take both seats the assumption will be that (President-elect Joe) Biden has more freedom to set policy and that likely means more fiscal easing," he said, which would lift risk sentiment and weigh on the dollar.
Vasu Menon, investment strategy executive director at OCBC Bank in Singapore said that while potential tax hikes are "not particularly market-friendly", the extra spending would be broadly bullish for commodities and emerging markets.
The dollar has fallen 13% against a basket of currencies =USD since it hit a three-year peak last March. The dollar index was steady at 89.491 on Wednesday, just above a 2-1/2 year low hit on Monday.
Bets against the dollar have become crowded as investors wager that low U.S. interest rates and a big trade deficit can keep it heading lower for some time yet.
Asian currencies have received an added boost from China's rising yuan, which increases China's purchasing power for commodities and other imports.
The yuan surged to its highest since June 2018 on Tuesday after the People's Bank of China lifted the midpoint of its trading band by 1%, the biggest one-day lift since China abandoned a peg to the dollar in 2005.
Traders took that as cue to keep buying, before profit taking and some selling by major state-owned Chinese banks cooled the rally. In offshore trade, the yuan steadied at 6.4293 on Wednesday CNH= .
It has gained 12% on the dollar since last May as China's economic rebound has led the world's pandemic recovery.
Currency bid prices at 9:50AM in Singapore (0150 GMT) Description
U.S. Close Pct Change
+102.8150 +102.6100 Euro/Yen
+126.4600 +126.1500 Dollar/Swiss
+0.8771 Sterling/Dollar GBP=D3
+1.3601 Dollar/Canadian CAD=D3
All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
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