FOREX-Yen firms in fresh flight to safety

* Yen rises as dollar holds gains elsewhere
* Aussie, kiwi languish around 60 cents
* Signs of funding stress abate, but remain elevated
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, March 18 (Reuters) - The safe-haven yen gained
sharply, but the dollar held onto hefty overnight gains against
other currencies on Wednesday, as fears over the coronavirus
pandemic kept markets frazzled despite massive injections of
liquidity by central banks.
The yen JPY= rose 0.8% to 106.80 per dollar with a flight
to safety in the Asia afternoon as stock markets around the
region extended losses. MKTS/GLOB
The pound and euro were ahead, but struggled to win back
more than a fraction of the ground ceded to the dollar on
Tuesday. The Aussie and kiwi languished below 60 cents.
Markets have crumbled this month as investors liquidated
nearly everything for cash - driving up the dollar's value and
the cost of borrowing the greenback abroad.
"Funding strains are still there, and I think that is what's
spooking the market still," said Moh Siong Sim, currency analyst
at the Bank of Singapore.
The world is adopting a war footing as the pandemic spreads
and country after country announces draconian lockdowns. The
virus has killed over 8,000 people globally, while the total
number of cases is approaching 200,000, a Reuters tally shows.
While crisis is also being met with massive fiscal and
monetary policy measures, there are only tentative signs that it
is working.
The Bank of Japan on Tuesday made its biggest injection of
dollar funds since 2008, helping to reduce the cost of dollars,
relfected in cross-currency basis swap spreads. The spread on dollar/yen swaps JPYCBS3M= narrowed to
around -58 basis points from 120 basis points on Tuesday.
Three-month euro/dollar cross-currency basis swap spreads
EURCBS3M=ICAP had also fallen back overnight to 39 basis
points from as high as 120 basis points.
But it failed to improve market sentiment.
"The newsflow is about as fluid as we have seen," said Chris
Weston, head of research at Melbourne brokerage Pepperstone.
"It mirrors that of the (2008) financial crisis if not worse
... it's very difficult to deal with this and I think FX traders
don't really know where to look at the moment."
The pound GBP= pared some gains to sit 0.4% higher at
$1.2094 and the euro EUR= was steady at $1.1007.
Export exposed currencies fared much worse.
The Australian dollar AUD=D3 has lost nearly 15% against
the greenback this year and fell below 60 cents for the first
time since 2003 overnight. It last stood at $0.5930, while the
kiwi NZD=D3 was $0.5942.
Traders have also been watching volatility in the U.S.
Treasury market to get a sense of the demand for dollars.
The yield on benchmark U.S. 10-year Treasuries US10YT=RR
soared 34 basis points overnight, the largest single-day rise
since 2004. US/
"It all stems from a shortage of US dollars," said Gunter
Seeger, senior vice president in investment-grade fixed income
at New York asset manager PineBridge Investments.
"People are very, very nervous," Seeger said.
"Everyone's nervous about the virus, about oil prices, about
their job, about everything."