* A$, NZ$, British pound slip, emerging market currencies
tumble
* Yen gains vs dollar; euro also supported
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Hideyuki Sano and Tom Westbrook
TOKYO/SINGAPORE, April 1 (Reuters) - The dollar gained
broadly against riskier currencies on Wednesday, with markets
staring at what is likely to be one of the worst economic
contractions for decades as the world locks down to fight the
coronavirus pandemic.
The greenback advanced against the Australian and New
Zealand dollars, sterling, and most emerging market currencies
as fresh selling in global shares highlighted growing risks from
the pandemic that has shown little sign of abating.
The Australian dollar dropped 0.35% to $0.6115 AUD=D4 and
the New Zealand dollar fell 0.3% to $0.5945 NZD=D4 while The
British pound shed 0.4% to $1.2376 GBP=D4 .
Emerging market currencies were hit harder, with the Mexican
peso MXN=D4 falling more than 1% to 23.960 to the dollar,
while the South African rand ZAR=D4 gave up 0.7% to 17.952 per
dollar. Most Asian currencies also dropped.
While the dollar's status as the world's reserve currency
makes it a natural safe haven, investors also flocked to the
safe-haven yen, which gained 0.2% against the dollar to 107.33
per dollar JPY= .
The euro eased 0.2% to $1.1015 EUR= but gained against
most other currencies as its vast liquidity is attractive at
times of economic stress.
"In my view, markets have still not fully priced in the
damage from the coronavirus, with some people still talking
about V-shaped recovery," said Masahiko Loo, portfolio manager
at Alliance Bernstein in Tokyo.
"The U.S. and Europe are hit by the first wave now, but as
you can see in Asia, there could be more waves from re-imported
cases. Human psychology also does not quickly recover either
after an experience like this."
The dollar held beneath overnight highs against most majors
and was well below multi-year peaks made last month, before the
Fed pumped more dollars into the system to calm markets.
The Fed on Tuesday broadened the ability of dozens of
foreign central banks to access dollars during the coronavirus
crisis by allowing them to exchange their holdings of U.S.
Treasury securities for overnight dollar loans. "The whole experience is testing the maxim in the market of
'don't fight the Fed,'" said Kyle Rodda, analyst at broker IG
Markets in Melbourne.
"The Fed clearly wants to do everything it can necessary to
ensure dollar liquidity, which puts downward pressure on the
dollar," he said.
"But by the same token there is still this very structural
push to buy dollars right now because liquidity is coming at an
absolute premium with so much risk in the market."
Against a basket of currencies =USD the dollar gained 0.3%
to 99.290.
SHARP CONTRACTION
Manufacturing data in Asia painted a bleak picture. Factory
activity in Japan and South Korea posted the biggest
contractions in about a decade. The Bank of Japan's "tankan" corporate survey showed
Japanese manufacturers turned pessimistic for the first time in
seven years. Surveys due later on Wednesday from countries including
Germany and the United States are expected to do similarly
little for investor confidence, while U.S. private employment
data is likely to show a drop in payrolls.
The virus has now killed more than 42,000 people and
infected more than 851,000 in 205 countries.
Goldman Sachs on Tuesday said it now forecasts a real GDP
sequential decline of 34% in the United States this quarter, on
an annualised basis, compared with an earlier estimate of a 24%
drop. "In the absence of either a material improvement in global
risk sentiment, or commodity prices, then together with ongoing
dollar strength, we are not convinced the Australian dollar can
easily maintain its foothold back above $0.60," National
Australia Bank analysts said in a note.
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(Editing by Simon Cameron-Moore and Jacqueline Wong)