FOREX-Dollar steadies after slide as greenback funding stays tight

* Fed move and rise in risk appetite hit dollar
* But signs risk rally is running out of steam
* Aussie up 0.5%, pound up 0.3%
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, March 25 (Reuters) - The dollar halted its
decline and gains in riskier currencies petered out on Wednesday
as fresh rises in coronavirus cases kept markets on edge and the
greenback funding market tight.
Foreign exchange markets were in consolidation as the
prospect of a huge U.S. stimulus package bolstered Asian stock
markets although gains in riskier currencies were tempered.
The safe-haven dollar, which had pulled back from recent
peaks, was now steady against the euro EUR= at $1.0789, and
fell only marginally against the yen JPY= to 111.11 yen per
dollar.
Currencies that fell the hardest last week hung on to
overnight gains. The pound GBP=D3 was steady at $1.1759, the
Australian dollar AUD=D3 was 0.2% weaker at $0.5941 after
running as far as $0.5990 in early trade.
The U.S Federal Reserve's offer of unlimited bond-buying, on
top of opening discount dollar funding lines to central banks
around the globe, has supported risk sentiment for the past day
along with hopes for a huge U.S. fiscal stimulus package.
The Dow Jones posted its biggest one-day gain since 1933
overnight and Asian markets kept the rally going on Wednesday.
MKTS/GLOB
But nerves and still-elevated demand for greenbacks in cash
capped further gains in currencies like the Aussie, euro and
pound.
"It's a nice rebound and we can probably run with it through
the Asian session, but whether this mood can hold 24 hours from
now, I'm not convinced," said Westpac FX analyst Sean Callow.
"The overall (virus) picture is still very grim and almost
certainly going to get worse."
Spain reported its sharpest increase in cases overnight.
India announced a 21-day lockdown of its 1.3 billion population.
The World Health Organization said that New York could
become the next epicentre of the pandemic. Within funding markets, signs of stress remain as businesses
and investors drive enormous demand for dollars to cover
liabilities and as a shelter from a maelstrom that has hit
nearly every asset class.
Cross-currency basis swap spreads, which reflect the cost of
borrowing dollars abroad have relaxed for the euro
EURCBS3M=ICAP but remain elevated for the yen JPYCBS= and
Australian dollar AUDCBS=ICAP , for example.
"There's a lot of reasons to believe that we're not out of
the woods yet," said Chris Weston, head of research at Melbourne
brokerage Pepperstone.
"People still feel that the downside risk is far more
prevalent...this is a traders' market, we're going to get levels
where people look to fade this again."
The New Zealand dollar NZD=D3 fell 0.5% to $0.5800, while
the Korean won KRW= handed back a small fraction of Tuesday's
3% gain.