FOREX-Dollar dominates as investors dump yen, Asia currencies on coronavirus spread

* New virus cases in South Korea, Australia
* Dollar soaks up FX flows from Asia
* Yen headed for worst week vs USD since 2017
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Feb 21 (Reuters) - The yen was headed for its
worst week in two-and-a-half years on Friday, as worries about
the coronavirus' spread in South Korea, Japan and Beijing drove
funds from Asia to the towering U.S. dollar.
Two days of heavy selling, following weak domestic data and
growing fears about the virus' economic fallout, has the yen at
its lowest since last April and investors questioning its worth
as a safe haven. It has lost 2% on the dollar since Wednesday.
The virus has killed more than 2,200 people in mainland
China and efforts to contain it have largely paralysed the
world's second biggest economy. On Friday South Korean
authorities confirmed 52 new coronavirus infections, Yonhap
reported, bringing its total to 156 and raising further alarm
about the epidemic. Two infected passengers from a cruise ship quarantined near
Tokyo have died, and two passengers evacuated from the liner to
Australia have now tested positive.
"New cases in (South) Korea and in Japan, (have) obviously
given some people a little bit of cold feet regarding Japan and
the yen as a safe haven," said David Bloom, global head of FX at
HSBC.
"They're thinking: 'Maybe Swissy and gold are better'. So
there is a little bit of scratching of heads, there's no doubt
about it," he said, adding he was not yet prepared to abandon
the idea of the yen as a safety play.
It morning trade it stood at 112.09 per dollar JPY= ,
mirroring weakness other currencies in Asia.
The Korean won KRW= has lost about 2% and broke past 1,200
to the dollar this week. The Australian dollar AUD=D3 is
parked by an 11-year low and, along with New Zealand's currency,
has shed 1.5% for the week.
Both are down more than 5% for the year amid the exodus from
export-exposed assets in favour of U.S. dollars.
Against a basket of currencies, the dollar is sitting pretty
at a three-year peak. =USD
China's tightly-managed yuan CNH= is sitting just a
fraction firmer than a two-and-a-half month low of 7.0547 per
dollar touched in offshore trade overnight. CNY/
Meanwhile factory activity in Japan suffered its steepest
contraction in seven years this month, data showed on Friday.
Should European Purchasing Managers' Index data show similar
softness, another round of dollar buying may be in the offing.
"The U.S. is simply less exposed to any slowdown in global
trade, and in terms of currencies it's the obvious candidate in
terms of relatively limited impact from coronavirus," said
Westpac FX analyst Sean Callow.
"If European business takes fright at coronavirus concern,
that could be a fresh cause of dollar buying across the board."
The euro sank to a three-year low this week and last traded
at $1.0788 EUR= . The pound is a fraction firmer than an almost
three-month low touched overnight at $1.2884 GBP= .