Euro back above 1.06, yen also rallies
Aussie adds 1, but election reaction limited
Poor start to week for dollar follows last week39;s selloff

LONDON, May 23 Reuters The euro rallied on Monday as investors sold the dollar on hopes that loosening lockdowns in China could help global growth.

A calmer mood on equity markets in early European trading also pressured the dollar, which fell sharply last week but has been the goto currency for investors this year when risk assets tumbled and worries about the economy and inflation jumped.

Risksensitive currencies rose across the board, with the Australian dollar, which initially showed a muted reaction to the expected victory for the centreleft Labor Party in national elections on the weekend, soaring almost 1.

Sterling rose 0.5, while the Norwegian crown also performed well as the selloff in the dollar that began last week continued into Monday.

We see this as just a temporary correction in the U.S. dollar for now. If we look at the main reasons why the dollar has been strengthening so much in recent months, we don39;t think that fundamental story has changed significantly over the past week, said MUFG analyst Lee Hardman.

But in the very short term there is a risk that this correction lower could extend further, he added, pointing to the buildup in long dollar positions in recent weeks that leaves the market vulnerable.

The euro rose 0.3 to 1.0602 , adding to a 1.5 gain last week and moving away from the 1.0349…