FOREX-Dollar, yen strengthen as Chinese virus toll rises

(New throughout; updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Jan 27 (Reuters) - The U.S. dollar index, the
Japanese yen and the Swiss franc rose on Monday morning, while
the offshore yuan tumbled to a 2020 low as growing fears about
the spread of a coronavirus from China pushed investors into
safer assets.
Health authorities around the world are working to prevent a
pandemic. The virus has killed 81 people in China, and nearly
2,800 people have been infected globally. Chinese Premier Li
Keqiang will "inspect and direct" efforts to control an outbreak
in the central city of Wuhan and promised reinforcements, as
people accused provincial authorities of being too slow to
respond. While safe-haven assets have strengthened, currency moves
were limited. The yen JPY= was the main beneficiary, up 0.3%
to 108.94, although it remained well below the peak hit on Jan.
8. The dollar index .DXY was up 0.07%, last at 97.925. The
Swiss franc CHF= was up 0.19% to 0.969 per dollar.
"The dollar usually does strengthen as a result of anything
that seems like it has the potential for physical chaos," Juan
Perez, senior foreign exchange trader and strategist, Tempus,
Inc.
The possibility of a rapid turnaround in the event the virus
is contained explains the relatively muted move in the dollar,
Perez said.
"We do think the dollar this week, if nothing improves, will
continue on this strong run. But of course, anything at any
moment can change if the headlines do turn, or if perhaps this
is somehow curable then expect markets to turn around and the
dollar to lose that safe-haven risk-off momentum."
The offshore yuan shed as much as 0.9% to 6.99 per dollar
CNH= , its weakest since Dec. 30.
The yuan has gone into a tailspin since it rallied to a
5-1/2-month high earlier in January. The dollar has gained more
than 2% versus the Chinese currency since last Monday.
The Australian dollar, which is exposed to the Chinese
economy, dropped 0.88% to $0.677 AUD= , its lowest since Dec.
2.
Traders said low liquidity could exacerbate market moves.
Financial markets in China, Hong Kong, Singapore and Australia
are closed for holidays.
The euro fell to a two-month low against the yen of 119.90
yen EURJPY= and was last 0.3% lower on the day to 120.08.
The euro erased its earlier gains against the dollar after
the Ifo institute said that German business morale deteriorated
unexpectedly in January. The euro was last 0.02% weaker at
$1.102 EUR= .