FOREX-Yuan, Aussie on back foot as China markets stumble on virus scare

* A$ near decade low; China equities, commodities tumble
* Yen, franc supported by virus uncertainty
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Feb 3 (Reuters) - The yuan and its proxy, the
Australian dollar, were on the defensive on Monday as China's
share market reopened with big losses after the Lunar New Year
break and anxiety over a virus outbreak in the country kept
investors on guard.
Chinese shares tumbled after the 10-day break was extended
to help stem the epidemic though falls were in line with what
had been indicated by Chinese share futures and ETFs (Exchange
Traded Funds) traded outside China.
Reaction in currency markets has been limited so far
although the mood remained cautious as authorities have taken
drastic steps worldwide to curb the epidemic.
Travel curbs and business shut-downs are hitting many parts
of China as the death toll rose by 56 to 350 on Monday in Hubei
province, ground zero of the epidemic.
Australia, Singapore and the United States are among
countries to have banned entry by foreign nationals who have
recently visited China. "The number of new patients continues to rise. And even
though the virus may be turning out not to be that severely
pathogenic, movements of people and goods will likely be
restricted for the time being," said Masashi Hashimoto, senior
currency analyst at MUFG Bank.
"That will surely pour cold water on signs of rebound in the
Chinese economy we saw since December."
The offshore yuan eased 0.1%, hitting one-month low of
7.0117 per dollar CNH= while its onshore unit fell over 1%
from its levels before the holiday to 7.0125 per dollar
CNY=CFXS .
The Australian dollar fetched $0.66925 AUD=D4 , up slightly
on the day but was precariously close to its 10-1/2-year low of
$0.6670 touched last October.
The currency is often regarded as a proxy to the yuan, being
more freely traded and because of Australia's reliance on trade
with China.
"Given the current fragile sentiment, I would not be
surprised to see the Australian dollar slipping below its
previous 10-year low," said senior strategist Yukio Ishizuki at
Daiwa Securities.
To head off any panic, China's central bank took a range of
steps to shore up an economy hit by travel curbs and business
shut-downs because of the epidemic, including an injection of
1.2 trillion yuan ($173.81 billion) worth of liquidity into
financial markets. Still, uncertainty created by the epidemic is keeping
investors cautious, helping support safe-harbour currencies.
"Fleeing to safe-havens is a big theme now. Investors will
continue to sell currencies in which they have long positions.
It will be difficult to buy the yuan at the moment," said Bart
Wakabayashi, Tokyo branch manager of State Street Bank.
The yen traded at 108.48 yen per dollar JPY= , a tad weak
so far in Asia but still close to its three-week high of 108.305
set on Friday.
The Swiss franc changed hands at 0.96395 franc per dollar
CHF= , near its 15-month high of 0.96135 set last month.
Against the euro, the franc stood at 1.06810 per euro
EURCHF= , just below its 33-month high of 1.0666 touched last
week.
The euro stood at $1.1084 EUR= , having risen 0.6% last
week for its first weekly gain in five helped by a boost from
month-end money flows from European exporters on Friday.
Elsewhere, sterling fell 0.2% to $1.3172 GBP=D4 .
Britain laid out a tough opening stance for future talks
with the European Union following its exit last week, saying it
would set its own agenda rather than meeting the bloc's rules.
Sentiment toward sterling may also be coloured by a stabbing
incident in London on Sunday, which police described as a
terrorist incident. Looking ahead, traders will keep an eye on the start of a
U.S. state-by-state nominating process to pick presidential
nominees, with Iowa holding caucuses on Monday. Senator Bernie Sanders and former Vice President Joe Biden
are running neck-to-neck among Democratic contenders vying to
challenge Republican President Donald Trump in November.
($1 = 6.9040 Chinese yuan)

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China's Hubei reports 56 new coronavirus deaths, total at 350
central bank to inject $174 bln via reverse repos on Feb.
3 yen, Swiss franc advance as virus fears
snowball attacker served prison term for terrorism offences,
police say ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>