FOREX-Dollar holds gains vs yen, virus risks dominate

* Yen nurses losses after worst session vs USD in 6 months
* Yuan steady, virus news awaited
* Mainland China death toll stands at 490
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Feb 5 (Reuters) - The dollar held gains against
the yen on Wednesday amid a broad unwinding of safe-haven
positions as China's responses to the coronavirus outbreak
supported investor confidence, even as deaths and new cases
climbed.
The coronavirus outbreak claimed its first life in Hong Kong
on Tuesday, as the mainland China death toll rose by 65 to 490
and the number of cases rose to 24,324. Against the rising death toll, however, the World Health
Organization said it remains possible to contain the virus'
spread. Some 99% of cases are in China, which has responded with
drastic quarantine measures and the injection of 1.7 trillion
yuan ($243 billion) into the financial system.
Reuters reported on Wednesday that more stimulus is likely
to follow. Those broader expectations of economic support as
well as recent measures prompted investors to partly reverse the
flight to safety seen over the past two weeks. Gold tumbled, the Japanese yen had its worst session against
the dollar in nearly six months and the Dow Jones stock index
posted its biggest daily gain since August in overnight trade.
MKTS/GLOB
However, the yen, seen as a haven by virtue of Japan's
position as the world's largest creditor, halted its decline by
morning, suggesting investors are still cautious.
It last traded just above a 1-1/2 week low at 109.43 per
dollar JPY= . The trade-exposed Australian dollar AUD=D3 , by
contrast, bounced 0.7% on Tuesday from not far above a decade
low to its highest in a week. It last stood at $0.6733.
"Investors want to see some actual stabilisation in cases
and an improvements in recovered people before rallying again,"
J.P. Morgan analysts wrote in note.
"As long as we don't see this in numbers, it feels like the
rally should be faded."
In offshore trade, the Chinese yuan CNH= held overnight
gains and stayed on the strong side of 7-per-dollar at 6.9943.
The New Zealand dollar NZD=D3 steadied at $0.6486.
One of the reasons the virus has caused so much alarm is
that much remains unknown about it, including the mortality rate
and transmission routes. What is becoming increasingly clear,
though, is the severity of its economic impact.
As people stay home, factories lie idle and shops shut
throughout China, economists have lowered their growth outlook,
with Louis Kuijs at Oxford Economics, for example, forecasting
5.4% growth in 2020, compared with 6% previously.
As that ripples through the world economy, companies are
already feeling the effects and forecasters are estimating a hit
of between 0.2% and 0.3% to global growth. Hong Kong's Cathay Pacific Airways Ltd 0293.HK said on
Tuesday it will cut around 30% of its capacity over the next two
months. Hyundai Motor 005380.KS will suspend production in
South Korea because of disruption to the supply of parts.
"The economic shocks to mainland China brought by the
coronavirus are likely to be 2 to 3 times larger than the SARS
debacle in 2003," said DBS economist Chris Leung, referring to a
previous epidemic that cut roughly a percentage point from GDP.
"The deepening of physical interconnectivity both within and
outside China ever since has increased substantially."
Elsewhere, sterling GBP= rebounded from six-week lows
overnight after better-than-expected construction activity data,
while the euro was steady against the dollar at $1.1042.
= 6.9979 Chinese yuan)