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FOREX-Dollar rally resumes as U.S.-China tensions escalate; Swiss franc falls

* Dollar index rises 0.1%

* U.S. fiscal stimulus boosts dollar

* Sino-U.S. tensions keep currency markets subdued

* Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E (Updates prices, adds commentary and graph)

LONDON, Aug 10 (Reuters) - The dollar strengthened on Monday, including against the euro and the Swiss franc, as investors focused on fiscal stimulus in the United States and U.S.-China tensions ahead of key trade talks on Aug. 15.

The dollar index is recovering from a losing streak which saw it lose 4% in July. It picked up on Friday after jobs data calmed some fears about the U.S. labour market but still weakened on the week, for the seventh in a row.

After talks in Washington over the next round of fiscal stimulus broke down, U.S. President Donald Trump signed executive orders on Saturday, partially restoring enhanced unemployment payments to tens of millions of jobless Americans.

The dollar index held steady in the Asian session but rose in early London trading on Monday, and was up 1% at 93.532 at 1008 GMT.

“A little stimulus is simply better than none at all,” wrote Commerzbank analyst Thu Lan Nguyen.

“At least that is how the market seems to see it, which is why the U.S. dollar is trading moderately stronger,” she added.

Speculators increased their net short dollar positions in the latest week, according to weekly futures data on Friday.

The dollar’s strength at the end of last week was also due to escalating tensions between the United States and China, with the U.S. imposing sanctions on top Hong Kong and Chinese officials.

This continued to drive investors towards the safe-haven dollar on Monday. China imposed sanctions on 11 U.S. citizens, including legislators.

Prominent democracy activist, Hong Kong media tycoon Jimmy Lai, was arrested on Monday under China’s new national security law in the territory, while U.S. health chief Alex Azar visited Taiwan on Sunday - a trip condemned by China which claims the island as its own.

Senior U.S. and Chinese officials will meet via teleconference on Saturday to review the implementation of their Phase 1 trade deal and likely air mutual grievances.

The euro was down 0.2% versus the dollar, at $1.17605 .

The Swiss franc fell versus the dollar, down 0.4% at 0.9159. Euro-franc was up 0.2% at 1.0773.

The Swiss National Bank sight deposits rose in the week ending Aug. 7. A rise in sight deposits can indicate central bank intervention in foreign exchange markets to weaken the franc.

“It looks then like Europeans are buying euros vs their currencies, particularly vs CHF, while the U.S. is buying EUR/USD,” wrote Marshall Gittler, head of investment research at BDSwiss Group.

Overnight data showed China’s industrial activity picked up in July, boosting hopes for an economic recovery and driving early gains in European stocks. The Norwegian crown gained versus the dollar, up around 0.4% at 9.0285.

The New Zealand dollar was down 0.2% versus the dollar, at 0.6585.

The Australian dollar was subdued, down 0.1% versus the U.S. dollar at 0.71525 after the country recorded a record-high daily increase in COVID-19 deaths on Monday. Prime Minister Scott Morrison said internal border closures were unlikely to be lifted before Christmas.

Australia’s central bank downgraded its outlook for the national economy on Friday and warned unemployment would stay high for several years.

Reporting by Elizabeth Howcroft; Editing by Kirsten Donovan and Susan Fenton

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