FOREX-Dollar flat as virus drives choppy trade in stocks, Treasuries

(Recasts with dollar flat)
By Kate Duguid
NEW YORK, Feb 26 (Reuters) - The dollar was little changed
on Wednesday as coronavirus headlines sapped sentiment, with the
greenback weakening after gaining earlier along with a rise in
U.S. stocks.
The dollar index =USD was 0.073% higher at 99.083. The S&P
500 index .SPX touched a session low as investor jitters were
stirred on news that the new coronavirus could spread to New
York. The number of new coronavirus infections inside China - the
source of the outbreak - was for the first time overtaken by
fresh cases elsewhere on Wednesday. The coronavirus fears drove a rally in U.S. bonds, pushing
the benchmark 10-year Treasury yield US10YT=RR to a record low
for a second consecutive day.
Despite the move in yields, dollar trading remained
range-bound. Against the Japanese yen JPY= , a safe-haven asset
which typically moves in step with yields, the dollar was 0.24%
stronger at 110.44.
"Given what we've seen in rates and what we've seen in terms
of the equity, you would have expected bigger moves to the
downside in dollar-yen," said Daniel Katzive, head of foreign
exchange strategy for North America at BNP Paribas.
Katzive said competing forces ultimately left the dollar
unchanged on the day. He cited an "underlying trend of dollar
strength this year ... which seems basically to be a function of
persistent wide yield differentials."
"You've had this big move in rates lower, so that's reducing
some of that rate differential," Katzive said. "You have upside
pressure on funding currencies like the euro and the yen as risk
positions get covered, so you have two offsetting forces."
Against the euro the dollar was 0.03% weaker at 1.0882
EUR= .
The dollar was also helped as investors scaled back
expectations that the U.S. Federal Reserve would signal more
policy easing in response to the spread of the coronavirus
outside of China.
Fed Vice Chair Richard Clarida said on Tuesday that while
the central bank is monitoring the impact of the epidemic on the
U.S. economy, it is too soon to gauge if a change in monetary
policy would be required. "If things calm down on the risk front, I think you'll
probably see the dollar gain some ground, especially if all this
Fed easing that has been priced in gets priced out," Katzive
said.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EURUSD implied vol https://tmsnrt.rs/393iXdr
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>