FOREX-Euro hit as coronavirus spread widens and investors rush for dollars

* Coronavirus cases in Italy spark pandemic worries
* Euro weakens back towards $1.08, Aussie at new 11-year low
* Yen, Swiss franc little moved as dollar dominates
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, Feb 24 (Reuters) - The euro dropped back towards
$1.08 on Monday and the Australian dollar tumbled to a new
11-year low as the rapid spread of the coronavirus outside China
drove fears of a pandemic and sent investors to the safety of
the U.S. dollar.
The safe-haven Japanese yen and Swiss franc were little
moved, however, underlining how the dollar has become the
currency of choice for worried investors because the U.S.
economy is seen as the most sheltered should the virus damage
the global economy.
Italy, South Korea and Iran posted sharp rises in infections
over the weekend. South Korea now has more than 760 cases, Italy
more than 150 and Iran 43 cases. The World Health Organization is now worried about the
growing number of cases that have no clear link to the epicentre
of the outbreak in China. "If you expect global growth to be lower on the back of this
... it still makes sense to bet on a stronger dollar," said
Morten Lund, an analyst at Nordea, also citing the U.S.
economy's relative strength and its higher yields over other
developed markets.
The euro weakened 0.3% to $1.0805 EUR=EBS , close to last
week's level of $1.0778 -- a nearly three-year low.
"I expect euro/dollar to move lower in the short term, not
only because of the incidents in Italy but because the euro zone
is much more exposed to China (than the United States)," Lund
said.
The dollar index .DXY gained 0.1% to 99.562, remaining
close to its highs of 99.915 touched last week.
The Australian dollar, often traded as a proxy for China
risk because Australian exporters depend heavily on Chinese
demand, weakened 0.5% to a new 11-year low of $0.6585 AUD=D3 .
The New Zealand dollar dropped 0.6% NZD=D3 .
Currencies closely linked to global growth and commodity
prices were also sent lower, with the Swedish crown EURSEK=D3
and Canadian dollar CAD=D3 down sharply.
The Chinese yuan fell in offshore markets. The dollar was
last up 0.1% at 7.0398 CNH=EBS yuan per dollar.
Emerging market currencies were also whacked lower.
Yet risk-aversion, which saw stocks tumble and gold rise,
offered little support to the yen JPY= . MKTS/GLOB
After partially recovering last week's drop on Friday, it
traded marginally higher at 111.42 per dollar as Asian investors
discount its safety value owing to Japan's virus exposure.

"The market reaction to the coronavirus appears to be
evolving, beginning to differentiate the currencies vulnerable
to the virus from the rest," Barclays analysts said in a note.
The Swiss franc was unchanged against the euro at 1.0606
francs EURCHF=EBS , very close to its strongest since 2015.