* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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By Saikat Chatterjee
LONDON, Jan 28 (Reuters) - Concerns about the economic
fallout from the coronavirus outbreak in China supported
safe-haven currencies on Tuesday, with the dollar index
approaching a two-month high and the Swiss franc holding near
the highest in almost three years.
Though global markets stabilised somewhat after Monday's
selloff, there was risk aversion in currency markets, with the
Australian dollar leading losers and the dollar strengthening to
an 8-week high against its rivals.
"Uncertainty on the virus news front is the name of the game
in the markets and markets don't like uncertainty," said Lee
Hardman, a currency strategist at MUFG in London.
The euro/Swiss franc cross EURCHF=EBS , a pair highly
correlated to risk sentiment, touched 1.0666 francs per euro,
the lowest since April 2017, before recovering to 1.0690.
It has fallen 1.6% so far in January and is on track for its
biggest monthly drop since April 2019.
Global stock markets and oil prices have tumbled in recent
days on fears the virus could further damage China's already
weakened economy, an engine of world growth. That also briefly
inverted the U.S. Treasury yield curve, considered a fairly
reliable recession predictor. MKTS/GLOB But larger moves were subdued, with the U.S. dollar adding
to previous gains ahead of the start of a two-day U.S. Federal
Reserve meeting later on Tuesday.
Against a basket of currencies .DXY , the dollar rose 0.1%
to 98.01, its highest since early December and taking its gains
so far this month to 1.7%. It remains unfazed by signs that
money markets are pricing a U.S. Federal Reserve interest-rate
cut later this year and possibly even a second.
Versus the euro, it firmed 0.14% to an eight-week high of
$1.100 EUR=EBS
Fed policymakers are largely expected to reiterate that
interest rates will remain on hold this year. "The market is taking a step back from the selloff earlier
due to the virus concerns though the dollar is unlikely to
weaken substantially as there is safe-haven demand for the
greenback," said Morten Lund, a senior FX strategist at Nordea.
The Australian and New Zealand dollars AUD=D3 NZD=D3 ,
both highly geared to China, shed 0.2% and 0.1% respectively.
Stability in the offshore yuan, after a recent drop,
provided some calm to nervous currency markets. The Chinese
currency firmed 0.2% versus the dollar CNH=D3 , rising off
three-week lows. At a time when mainland markets are shut, the
offshore yuan has weakened more than 2% in less than a week.
Elsewhere, the yen JPY=EBS held steady at 108.97 per
dollar, close to its strongest level since Jan. 8.
Japan's currency has risen against the greenback for the
last five trading sessions due to growing risk aversion.
The Norwegian crown was another laggard NOK=D3 , weakening
0.3% versus the dollar to six-week lows, dented by six days of
falling oil prices.
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EURCHF https://tmsnrt.rs/2tVM9Ut
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