* Dollar rebounds sharply as traders seek liquidity
* Yen, euro, pound all down around 1%
* Emerging market currencies weaken to Sept 2018 levels
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Updates prices, adds details)
By Tommy Wilkes
LONDON, March 17 (Reuters) - The U.S. dollar's rally
gathered steam on Tuesday as nervous traders rushed to buy the
most liquid currency, while the Australian dollar tumbled to a
17-year low amid growing panic about a coronavirus-induced
economic slump.
Coordinated moves by central banks have failed to quell
anxiety about the coronavirus pandemic, and financial markets
are tumbling.
Investors are now waiting to see the scale of government
fiscal responses to battle the economic fallout from the virus
and limit the expected contraction.
The U.S. currency had initially fallen in early March as
U.S. government bond yields tumbled, but the dollar has since
rebounded, and measured against a basket of major currencies is
now up around 5% in eight days.
Funding pressures in the market for dollars are growing
sharply as investors and companies rush to get their hands on
the greenback. "The biggest risk, and at the moment it's our bearish
scenario, is that this morphs into a systemic crisis," said
Guillermo Felices, a senior strategist and portfolio manager at
BNP Paribas Asset Management.
Investors have taken central bank action as insufficient
given the coronavirus's breakneck spread across the world, which
has put many nations into virtual lockdown and sparked warnings
about a brutal global recession.
The U.S. dollar index =USD on Tuesday rose more than 1% to
as much as 99.421, its highest since Feb. 24.
The euro dropped 1.6% to $1.10 EUR=EBS and was headed for
its biggest one-day loss since June 2018.
Sterling sank to its weakest since September, down 1.5% at
$1.2085 GBP=D3 at one point.
The dollar rallied 1% versus the yen to 107 yen, reversing
much of Monday's loss JPY=EBS .
AUSSIE AT 2003 LOWS
The Australian dollar AUD=D3 , seen as sensitive to global
growth due to the country's commodities exports, fell 1.8% to
$0.5992, its weakest since 2003.
The Aussie is now down 8% so far in March.
The Reserve Bank of Australia has reiterated it stands ready
to ease policy further in the face of the unprecedented spread
of the coronavirus, adding to speculation about aggressive
stimulus measures this week. The New Zealand dollar sank 1.5% to $0.5953 NZD=D3 , near
an 11-year low.
The Canadian dollar, which is exposed to the rapidly-sinking
crude oil price, is at four-year lows and was down around 1% on
Tuesday at C$1.4160 CAD=D3 .
Volatility has doubled in forex markets in the space of a
few weeks, but has been less pronounced than in equities and
bonds. Analysts said that despite the poor liquidity and large
moves, trading had been relatively orderly.
Not everyone thinks the U.S. dollar's rally will last.
"Fixing the plumbing has tended to be one of the things that
central banks can do in a crisis," said Kit Juckes, a strategist
at Societe Generale. "So this period of renewed dollar strength,
while likely to be sharp, is also likely to be short-lived."
Investors have been dumping emerging market currencies and
MSCI's emerging market currency index .MIEM00000CUS dropped
0.5%, its lowest since September 2018.
The Korean won KRW= hit its lowest since 2010. while the
Russian rouble RUB= , Mexican peso MXN= and Indian rupee
INR= all fell again. EMRG/FRX
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U.S. dollar index https://tmsnrt.rs/2WrtpI6
Australian vs U.S. dollar https://tmsnrt.rs/38XGOui
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(Editing by Catherine Evans)