FOREX-Dollar cedes gains as U.S. virus spread deepens pandemic fear

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Tracking the coronavirus: https://tmsnrt.rs/3aIRuz7
* Some worry U.S. has underestimated coronavirus
* Virus now spreading more quickly outside of China
* Risk aversion to remain a diver of currency markets

By Stanley White
TOKYO, Feb 27 (Reuters) - The dollar fell against the yen
and the Swiss franc on Thursday after the first coronavirus
infection of unknown origin was confirmed in the United States,
adding to fears of a pandemic.
The dollar also fell from a three-month high versus the
pound and declined versus the euro as 10-year U.S. Treasury
yields crashed to a record low as concerns grew over whether the
world's largest economy was prepared for the epidemic.
Other currencies were locked in narrow ranges as traders
nervously monitor the global spread of the coronavirus that
emerged in China late last year.
New infections of the virus are now growing faster outside
of China than within, stoking fears that the economic impact of
travel curbs, supply chain disruptions, and falling demand might
be far greater than previously anticipated.
"The dollar doesn't look so safe if we are dealing with the
spread of the virus in the United States," said Yukio Ishizuki,
foreign exchange strategist at Daiwa Securities in Tokyo.
"The are some concerns that the U.S. government is
underestimating the coronavirus."
The dollar fell 0.35% to 110.06 yen JPY=EBS , extending a
pullback from a 10-month high of 112.23 yen reached on Feb. 20.
The dollar also fell 0.35% to 0.9735 Swiss franc, a currency
that is traditionally sought as a safe haven.
Benchmark 10-year U.S. Treasury yields US10YT=RR slumped
to a record low of 1.2970% in Asia on Thursday.
Treasuries have rallied recently, which traders initially
attributed to safe-haven demand, but some investors now say
these purchases are tied more to expectations for monetary
easing as the global economy struggles.
The Centers for Disease Control and Prevention warned on
Wednesday of the possibility of community spread after
confirming a coronavirus infection in someone who had not
travelled abroad or been exposed to a known carrier of the
virus, a first for the country.
That brought the total number of cases in the United States
to 15, according to the CDC, which is still a tiny fraction of
the cases in China. Investors in the dollar are also focused on the release of
U.S. durable goods orders and gross domestic product data later
on Thursday, which could test the greenback if the numbers
disappoint expectations.
Efforts to contain the outbreak have paralysed large swathes
of China's economy, which are only slowly returning to normal.
There are worries that other countries could face the same
problem as the virus spreads around the world.
In the onshore market, the yuan CNY=CFXS held steady at
7.0184 against the dollar, getting some reprieve as the focus of
the virus shifted to rising infections beyond China.
Chinese officials said the number of new deaths from the
virus fell to the lowest since Jan. 28, but there is still a
degree of uncertainty about the human toll from the epidemic in
China. Elsewhere in currency markets, South Korea's won KRW= fell
0.4% to 1,217.45 per dollar after an increase in coronavirus
infections in the country.
South Korea's central bank kept its key interest rate
unchanged on Thursday, defying expectations for a rate cut.
South Korea has emerged as a global hot spot for the virus, and
some investors say rate cuts are unavoidable.
The pound GBP=D3 rose 0.27% to $1.2933. Sterling hovered
near a two-week low versus the euro, at 84.46 pence per euro
EURGBP=D3 .
The new round of talks between Britain and the EU is
scheduled to start on Monday, but comments from both sides
suggest their views on the scope of a fee-trade agreement differ
greatly. The euro EUR=D3 rose 0.24% to $1.0902 as traders pondered
how European officials would respond to a weakening economic
outlook.
Germany's government is considering suspending strict rules
on the amount of debt it can raise, the finance ministry said on
Wednesday, as it faces growing pressure to kick-start a sluggish
economy by spending more. (Editing by Shri Navaratnam and Jacqueline Wong)