* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E (Updates prices, adds comment, adds detail)
By Elizabeth Howcroft
LONDON, Sept 7 (Reuters) - The dollar fell on Friday, close to its lowest in three months and on track for a weekly loss against a basket of currencies, as markets continued their rally on vaccine progress and hopes for a global economic recovery.
The dollar has fallen more than 2.2% so far this month as global market sentiment has surged following Joe Biden's U.S. election victory, positive COVID-19 vaccine announcements and a commodity surge, which lessened demand for the safe-haven currency.
Sentiment was mixed in early London trading after several scientists raised doubts about the success rate for the vaccine developed by British drugmaker AstraZeneca, but European shares picked up as the session went on.
AstraZeneca had said on Monday that its vaccine was 70% effective in pivotal trials, and could be up to 90% effective - the latest in a slew of positive vaccine announcements which had boosted investor confidence, even as COVID-19 hospitalizations reach record highs in the United States.
"The markets have a tendency to perhaps look through the fact that we’re going to have a really nasty Q4, possibly a very nasty Q1 too, in terms of economic data in Europe and the U.S., and look through to the better times ahead," said Jane Foley, senior FX strategist at Rabobank.
"We’ve seen various stock market indices at all-time highs, so the dollar under pressure. Also keeping the dollar under pressure is this perception that the Fed will act, will pressure the yield curve lower, if need be, particularly if there continues to be a delay over the fiscal package," she said.
The U.S. Federal Reserve's latest meeting minutes said that policymakers could give new guidance on bond-buying "fairly soon".
At 1213 GMT, the dollar was down 0.1% on the day at 91.996 , having reached its lowest since Sept. 1 earlier in the week.
ING strategists rote in a note to clients that the dollar was likely to keep oscillating around the 92 level in the dollar index on Friday in the absence of other catalysts.
Analysts said that volumes were lower as the United States will have reduced trading hours on Friday, following the Thanksgiving holiday on Thursday.
The Australian dollar - seen as a liquid proxy for risk - hit its highest in nearly three months in early London trading and was up 0.2% at 0.73735 at 1215 GMT.
Australia's second-largest state, Victoria, which was once the country's COVID-19 hotspot, said on Friday that it has gone 28 days without detecting new infections.
The Kiwi dollar, which is having its best month since late 2013, was up 0.1% on the day at 0.7015.
"Clearly, the biggest single risk for financial markets now is the failure of vaccines being rolled out smoothly in Q1 2021," wrote MUFG strategist Derek Halpenny.
"The other key risk that also continues to be ignored is the ongoing surge in COVID infections and deaths in the US," he said, adding that if President-elect Joe Biden brings in new lockdown restrictions while the rest of the world is recovering next year then that provide a further reason to sell the dollar.
Dollar-yen was down 0.1% at 104.16 at 1215 GMT. China's offshore yuan was on track for its first week of net losses versus the dollar this month.
The euro was up 0.1% at $1.19185, having shown little reaction to downbeat comments from the European Central Bank's chief economist Philip Lane on Thursday.
With market participants long on the euro, Rabobank's Foley said that euro-dollar could face downsides as the ECB has signalled that it is watching euro appreciation. The EU budget which includes the COVID-19 recovery fund has not yet been approved.
“The market hasn’t yet reacted to the Hungary/Poland issue - the vetoing of the budget," she said. “The market might be underestimating that battle.” (Reporting by Elizabeth Howcroft; Editing by Simon Cameron-Moore and Chizu Nomiyama)