FOREX-Dollar buoyed on safety bids as U.S. coronavirus numbers dim quick recovery hopes

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, June 25 (Reuters) - The dollar held firm on Thursday
as an increase in coronavirus cases in the United States
undermined hopes for a quick turnaround in the pandemic-hit
economy and prompted traders to cuts bets on riskier currencies.
The dollar's index against a basket of currencies
strengthened to 97.21 .DXY .
The euro retreated to $1.1251 EUR= while the British pound
also stepped back to $1.2423 GBP=D4 .
New daily U.S. virus cases surged to nearly 36,000 in the
latest tally, near a record of 36,426 hit in late April. The
percentage of positive results in tests is also climbing.
The governors of New York, New Jersey and Connecticut
ordered travellers from nine other U.S. states to quarantine for
14 days on arrival as COVID-19 showed signs of surging in the
southern and western parts of the country.
Also souring the mood was news that Washington is
considering changing tariff rates for various European products
as part of the trading partners' aircraft dispute. "The risk-averse mood is supporting the dollar. After the
markets have priced in all the positive news about economic
recovery, now we are seeing the news about the second wave,"
said Shinichiro Kadota, senior currency strategist at Barclays.
Commodity currencies, which had been supported by rally in
oil and commodity prices, also took a hit.
The Australian dollar traded at $0.6864 AUD=D4 after
losing 0.90% the previous day while the Canadian dollar CAD=D4
drooped to C$1.3644 to the dollar, not helped by Fitch's
downgrade of Canada's sovereign rating.
The rating firm cut Canada's rating to "AA+" from "AAA,"
citing deterioration of the country's public finances in 2020
because of the COVID-19 pandemic. Against the yen, the dollar also jumped back to 107.05 yen
JPY= from a 1 1/2-month low of 106.075 touched on Tuesday.
The International Monetary Fund slashed its 2020 global
output forecasts further as it sees deeper and wider damage from
the pandemic than first thought. It now expects global output to shrink by 4.9%, compared
with a 3.0% contraction predicted in April, with U.S. output now
forecast to shrink 8.0%, more than 2 percentage points worse
than the April forecast.
While massive stimulus by many governments have cushioned
initial blows from the pandemic, helping many companies survive
lockdowns, investors fear a deeper recession would mean
corporate income will not recover as quickly as they have
initially hoped.
Bob Prince, Co-Chief Investment Officer of Bridgewater
Associates, said U.S. stimulus efforts may be able to support
corporate cash flows for the summer but that economic risk from
the coronavirus pandemic is likely to extend far beyond that.