FOREX-Dollar holds advantage as coronavirus fears weigh on markets

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Risk appetite wanes as virus cases grow
* Dollar gains slow yuan's rally
* Lockdown in Melbourne another negative for market
sentiment

By Stanley White
TOKYO, July 8 (Reuters) - The dollar held onto gains on
Wednesday as a resurgence of the coronavirus in the United
States and the return of lockdowns in some countries boosted
safe-haven demand for the U.S. currency.
Risk sentiment was also undermined after Federal Reserve
officials expressed concern that rising coronavirus cases could
harm economic growth just as stimulus measures start to expire.
The yuan fell slightly against the dollar, halting a two-day
rally, after the Chinese central bank's daily midpoint for the
currency was set at a weaker than expected level.
Other Asian currencies straddled narrow ranges as a
resurgence of coronavirus cases threatened a return of lockdown
restrictions, leaving investors fretting about the mounting
economic costs of the pandemic.
"The mood changes day by day, but the dollar looks to be
supported for now as investors turn more cautious about the
virus," said Yukio Ishizuki, foreign exchange strategist at
Daiwa Securities.
"The Fed's comments on the economy sound sombre. There's
reason to worry because it is hard to see when the virus will be
brought under control."
The dollar traded at 107.58 yen JPY= on Wednesday
following a 0.3% gain on Tuesday.
Against the euro, the dollar was quoted at $1.1278, also
holding to a 0.3% gain from the previous session.
The greenback bought 0.9428 Swiss franc CHF=EBS , little
changed on the day.
Sterling GBP=D3 changed hands at $1.2554 and was quoted at
89.86 pence per euro EURGBP=D3 .
The pound was near three-week highs as traders awaited
British finance minister Rishi Sunak's announcement later on
Wednesday of his next moves to prevent a wave of job cuts from
damaging an already weakened economy. Equities weakened and U.S. Treasury yields edged lower as
the number of confirmed coronavirus cases in the United States
pushed past 3 million on Tuesday, according to a Reuters tally,
stoking fears that hospitals will be overwhelmed. The United States has the highest known numbers of
coronavirus cases and deaths in the world.
Adding to the cautious tone, three Fed officials expressed
concern that the surge in infections threatens to pinch consumer
spending and job gains just as some stimulus programmes are set
to expire.
One Fed policymaker pledged more support ahead from the U.S.
central bank. Some traders warn that the dollar could break out of its
range against the yen because currency options are set to expire
later Wednesday and Thursday.
The onshore yuan CNY=CFXS eased slightly to 7.0200,
pulling back from an almost four-month high reached on Tuesday
amid speculation the People's Bank of China is trying to check
the currency's gains.
While China's industrial output has recovered faster than
most other countries, further expansion will be hard to attain
without stronger, broad-based demand and a turnaround in
exports. CNY/ The Australian dollar AUD=D3 was little changed at $0.6939
following a 0.4% decline on Tuesday. Sentiment for the Aussie
has taken a hit after coronavirus lockdown measures were
reimposed in Australia's second biggest city of Melbourne on
Tuesday. The New Zealand dollar NZD=D3 was little changed at
$0.6545.