FOREX-Safe-haven demand cools as virus fears wane; dollar still bid

(New throughout)
By Kate Duguid
NEW YORK, Jan 28 (Reuters) - The Japanese yen and Swiss
franc eased off earlier highs as fears about the economic
fallout from the coronavirus outbreak in China waned, though the
dollar index held near two-month highs.
Global markets had stabilized somewhat after a risk sell-off
which ran from Monday through Tuesday morning. The Japanese yen
JPY= was last 0.22% weaker at 109.13 per dollar, having hit a
2-1/2-week high on Monday. The Swiss franc was 0.36% weaker
against the dollar CHF= , last at 0.973.
Earlier Tuesday the Swissie had strengthened to 1.067 francs
per euro EURCHF= , its highest since April 2017.
"If there's anything driving things, it seems just to be the
fading of concerns around the coronavirus. This is based on more
reports that the Chinese are clamping down," said Thierry
Wizman, global interest rates and currencies strategist at
Macquarie Group.
President Xi Jinping said on Tuesday that China was sure of
defeating the "devil" coronavirus, which has killed 106 people.
Yet despite his confidence, international alarm has risen: From
France to Japan governments organized evacuations, while Hong
Kong planned to suspend rail and ferry links with the mainland.
Global stock markets and oil prices have tumbled in recent
days on fears the virus could further damage China's already
weakened economy. That also briefly inverted the three-month,
10-year U.S. Treasury yield curve, considered a fairly reliable
recession predictor. MKTS/GLOB By Tuesday afternoon, however, U.S. stocks and Treasuries
yields had turned around and the offshore yuan CNH= saw some
relief. The Chinese currency firmed 0.24% versus the dollar
CNH= , rising off three-week lows.
The dollar index .DXY , another safe-haven asset, was
slightly off the two-month high hit earlier in the day, but
remained in demand on Tuesday afternoon. It was last trading up
0.4% on the day at 97.995.
"With much of Asia closed, I think maybe foreigners are
feeling like the only way they can get exposure to global stock
markets in view of the better news on the virus is simply to buy
the U.S. market because China is closed, Hong Kong is closed.
Maybe that's why the dollar is stronger. If that's the case,
then that would reverse at the time that the other markets open
up again for trading," said Wizman.
The Federal Reserve began a two-day policy meeting on
Tuesday, at which it is largely expected to reiterate that
interest rates will remain on hold this year.