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

* Dollar steady against euro, falls versus safe-haven yen
* Canadian dollar weaker as BoC leaves room for more cuts
* Sterling rises as BoE resists pressure of easing policy
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga
LONDON, March 5 (Reuters) - The U.S. dollar struggled on
Thursday as traders priced in more monetary policy easing by the
Federal Reserve after it cut interest rates by 50 basis points
this week in an emergency move to shield the economy from the
coronavirus spread.
Analysts highlighted the fact that the Fed had mentioned the
virus 48 times in its latest Beige Book report, compared with no
mentions before, suggesting policymakers were highly concerned
about the virus' negative effect on the economy.
"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 greenback remained close to the two-month
low of 1.1214 it fell to against the euro on Tuesday, last
trading neutral at 1.1132 versus the common currency EUR=EBS .
The euro had also benefited earlier from traders unwinding their
carry trade positions, analysts said.
Lee Hardman, currency analyst at MUFG, said "sharper euro
falls could emerge quickly" if the coronavirus spreads further
in the euro zone. "Further euro depreciation may follow despite
its outperformance of late," he said.
Versus the safe-haven Japanese yen, the weakness in the U.S.
currency was more pronounced. Dollar-yen was last down by 0.3%
at 107.28 JPY=EBS , not far from the five-month low of 106.85
if plunged to on Wednesday.
Very low U.S. yields and the prospect of even more monetary
easing held back gains in the dollar, though strong data showing
U.S. services activity at a one-year high had pushed the
greenback higher against the euro in Asian trading.
The strong performance of former Vice President Joe Biden in
the Democratic nomination campaign had also pulled the dollar
firmer. Biden is considered less likely to raise taxes and
impose new regulations on business than rival Bernie Sanders.
But deep concern about the widening fallout from the
coronavirus outbreak weighed more strongly on the dollar and
other main 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 followed suit from its U.S. counterpart
and was down 0.2% against the greenback at 1.3407 CAD=D3 , in
the aftermath of Bank of Canada joining the Fed in cutting
interest 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 has refused for now to give in to the
pressure, leaving rates unchanged for now. Sterling, as a
result, hit a six-day high of $1.2903 GBP=D3 and a three-day
high versus the euro of 86.22 pence EURGBP=D3 .
Money markets, however, are pricing in a full 25 bps rate
cut 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.