FOREX-U.S. dollar struggles as traders price in more Fed cuts

* Safe-haven Japanese yen hits five-month high vs dollar
* Canadian dollar weakens as BoC leaves room for more cuts
* Sterling rises as BoE resists pressure of to cut rates
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates prices, adds chart)
By Olga Cotaga
LONDON, March 5 (Reuters) - The U.S. dollar fell on Thursday
amid expectations of the Federal Reserve will cut interest rates
further, after slashing them by 50 basis points this week in an
emergency move to shield the economy from the effects of
coronavirus.
The Fed had mentioned the epidemic 48 times in its latest
Beige Book report, suggesting policymakers were highly concerned
about the economic damage of the disease.
"The reports in the Beige Book are likely to have been
important for the Fed's inter-meeting rate cut," said Olle
Holmgren, chief strategist at SEB.
Money markets were pricing in another 25 bps cut from the
current 1% to 1.25% range at the next Fed meeting on March 18-19
and a 50 bps cut by April. FEDWATCH=
As a result, the dollar remained close to the two-month low
of 1.1214 it reached against the euro on Tuesday, last trading
0.4% lower at 1.1175 EUR=EBS . The euro also benefited from
traders unwinding their carry trade positions, analysts said.
"Sharper euro falls could emerge quickly" if the coronavirus
spreads further in the euro zone, said Lee Hardman, currency
analyst at MUFG. "Further euro depreciation may follow despite
its outperformance of late."
Versus the safe-haven Japanese yen, the dollar's weakness
was more pronounced. Dollar-yen was last down 0.7% at 106.81
JPY=EBS , a five-month low.
Low U.S. yields and the prospect of even more monetary
easing added pressure to the dollar, though data showing U.S.
services activity at a one-year high had pushed it higher
against the euro in Asian trading.
Former Vice President Joe Biden's victories in the
Democratic primaries also helped the dollar. Biden is considered
less likely to raise taxes and impose new regulations than rival
Bernie Sanders. But the coronavirus outbreak weighed more strongly on the
dollar and other major currencies. Mainland China reported a
rise in new infections on Thursday, deaths are mounting
globally, Italy has closed its schools and California has
declared a state of emergency as cases there increase.
The Canadian dollar was down 0.1% against the U.S. dollar at
1.3399 CAD=D3 , after the Bank of Canada joined the Fed in
cutting rates by 50 bps - its largest cut in 10 years - and
leaving the door open to further easing. Falling oil prices also
put pressure on the loonie.
The Bank of England is leaving rates unchanged for now, and
sterling rose to a one-week high of $1.2931 GBP=D3 and a
three-day high versus the euro of 86.22 pence EURGBP=D3 .
Money markets, however, are pricing in a 25 bps rate cut by
the BoE on March 26, incoming Governor Andrew Bailey's first
policy meeting.
Traders will be watching later in the day the release of
initial jobless claims and factory orders in the U.S. Both data
sets are expected to be weaker.

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