FOREX-Rate cut expectations give pause to soaring dollar

* Virus spread beyond China drives Fed rate repricing
* Cuts, not a hike, now expected in 2020
* Dollar pauses gains against Asian currencies
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Feb 25 (Reuters) - The dollar checked its march
higher on Tuesday, as investors sharply raised bets that the
growing fallout from the coronavirus outbreak would prompt U.S.
interest rate cuts.
World markets are in a tailspin as infections spread quickly
beyond China. The World Health Organization has said it is not a
pandemic yet, but the potential exists. MKTS/GLOB
Supply chains around the world are jammed as China locks
down to combat the virus and stocks have tumbled, bonds have
jumped and expectations of rate hikes in the United States have
vanished.
Futures for the Federal Reserve funds rate 0#FF: have
surged to now price in a rate cut by June and more than 50 basis
points of reductions by year end - pause for thought in the
recent rush to buy dollars.
"It's been quite dramatic," said Rodrigo Catril, senior FX
strategist at National Australia Bank in Sydney.
"We've seen not only a repricing of Fed expectations, but a
bigger re-pricing because the Fed is the one that can actually
do something in terms of moving the cash rate," he said.
In morning trade, the Australian and New Zealand dollars
were creeping up from milestone lows against the greenback, as
was the euro EUR= . The Aussie last bought $0.6616, a third of
a cent more than the 11-year low hit on Monday AUD=D3 .
China's yuan firmed 0.2% to its strongest level since last
week at 7.0220 CNY= . The Korean won KRW= , Taiwan dollar
TWD= and Singapore dollar SGD= steadied their slides on the
greenback. EMRG/FRX
Against a basket of currencies the dollar was flat at 99.321
=USD . However, without much good news on the virus, few expect
the dollar to give back too much of its recent strength.
Indeed, the Japanese yen JPY= , which rebounded hard
overnight with the flight to safety, handed back a bit of its
rise as Asian traders still fret about its exposure to China.
"Despite the Aussie/dollar holding up overnight, we see the
balance of risks to the downside as tail risks rise," ANZ
analysts said in a note.
China reported another rise in new coronavirus infections on
Tuesday, with 508 compared to 409 a day earlier. Almost 2,700 people have died in China and its economy has
been paralysed by lockdown measures imposed to try and halt the
virus' spread.
Italy and South Korea are now beginning to use similar
tactics to quell their outbreaks.
"The jump in cases outside of China raises the risk of a
sharper Q1 2020 global economic slowdown," said CBA analyst Kim
Mundy. "It also raises the risk that the economic disruption is
more prolonged."