FOREX-Yen stumbles on revived risk flows, yuan softens after rate cut

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
* Tracking the coronavirus: https://tmsnrt.rs/3aIRuz7
* Yen tumbles as risk sentiment shifts
* Traders focus on China policy response to virus
* Pound looks ahead to retail sales data

By Stanley White
TOKYO, Feb 20 (Reuters) - The Japanese yen traded near a
nine-month low versus the dollar on Thursday as risk appetite
improved on expectations that China will continue to take steps
to reduce the economic impact of the coronavirus outbreak.
The yuan CNY=CFXS fell against the dollar in onshore trade
after China cut the benchmark loan prime rate to prop up its
economy. The rate cut was expected but some investors see more
reductions in the near term as the authorities move to further
lower financing costs to help companies. The Australian dollar tumbled to the lowest level in more
than a decade as a rise in the unemployment rate fanned
expectations for interest rate cuts.
The yen was initially bought as a safe-haven asset when the
outbreak of the virus in the central Chinese province of Hubei
roiled financial markets last month.
However, yen buying is starting to fade as growth in the
number of new cases of the virus in mainland China began to
slow. Signs that Chinese officials are ready to take more
drastic measures to support companies hit by the virus is
another factor that has reduced demand for safe-haven
investments.
"The yen's fall was so sudden that it could bounce back
slightly in the very short term," said Yukio Ishizuki, foreign
exchange strategist at Daiwa Securities in Tokyo.
"However, sentiment is leaning away from risk-off because
China will pull out all the stops to support its economy."
The yen JPY=EBS traded at 111.29 per dollar in Asia on
Thursday, close to the lowest since May 2019.
Japan's currency tumbled 1.3% on Wednesday, its biggest
daily decline since August, after triggering stop loss orders
following the expiry of options that had kept the yen in a
narrow range versus the dollar, according to Ishizuki.
In the onshore market, the yuan fell 0.9% to 7.0046 per
dollar after the one-year loan prime rate (LPR) was cut 10 basis
points, and the five-year LPR by five basis points on Thursday.
The LPR cuts followed a similar move in the central bank's
medium-term lending rate on Monday as policymakers sought to
ease the drag to businesses from the coronavirus outbreak.
China's manufacturing sector is gradually coming back on
line after the outbreak of the virus led to temporary factory
closures and severe travel restrictions, but many companies and
households are likely to struggle due to income lost because of
the illness.
China reported on Thursday a drop in new cases of the
flu-like virus in Hubei province, the epicentre of the outbreak.
Although it was accompanied by a change in diagnosis rules, the
data helped risk appetite improve in the currency market.
The Swiss franc CHF=EBS , another safe-haven, was quoted at
0.9832 versus the dollar, close to its weakest since December.
Many traders say they remain cautious because the previously
unknown virus has resulted in more than 2,000 deaths in China
and spread to 24 other countries.
The Australian dollar AUD=D3 skidded to $0.6641, a low not
seen since March 2009, after data showed the country's jobless
rate jumped to 5.3% in January from 5.1% in December.
Sentiment for the Aussie had already taken a hit after
minutes from a Reserve Bank of Australia meeting released
earlier this week revealed that central bankers had considered
easing policy. A weak labour market makes rate cuts more likely.
The euro EUR=EBS traded at $1.0802, close to its lowest
since April 2017. The common currency managed to stabilise in
Asian trading, but sentiment remains weak after disappointing
economic data sent it crashing through closely-watched support
levels.
The pound GBP=D3 was quoted at $1.2920 before data later
on Thursday that is forecast to show growth in British retail
sales.
Sterling fell 0.6% on Wednesday as market sentiment is
caught between optimism about the economy and pessimism about
Britain's talks with the European Union for a free trade deal.

(Editing by Sam Holmes and Jacqueline Wong)