* Dollar recovers as risk aversion returns
* Euro falls as EU finance ministers fail to agree further
support
* Talks put on hold until Thursday
* Aussie dollar recovers after ratings outlook cut
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Wilson
LONDON, April 8 (Reuters) - The dollar firmed on Wednesday
as optimism that the coronavirus crisis was slowing waned,
increasing investor concerns over the economic impact of the
pandemic.
The euro among was the main loser at the greenback's
expense, a day after the dollar suffered its worst drop against
a basket of currencies in nearly two weeks.
The dollar's rise came as global stocks turned negative
after two days of gains as deaths from the coronavirus mounted
across the globe. European equities fell amid renewed concern
about the spread of the virus and the continent's response to
it, mirroring Asian markets and a fall on Wall Street late on
Tuesday.
The euro EUR=EBS fell 0.2% to $1.0875, hit by the failure
of European Union finance ministers to agree on further support
for their coronavirus-hit economies. The impasse spooked bond
markets and sent shorter-dated Italian yields spiking higher.
GVD/EUR
The talks, which are trying to agree a package of measures
for governments, companies and individuals, were suspended until
Thursday. A feud between Italy and the Netherlands over what
conditions should be attached to euro zone credit for
governments was blocking progress, sources said. "We don't expect much progress to be achieved and a move
towards debt mutualisation seems unlikely at this point," ING
wrote.
Yet the impasse will likely have a limited impact on the
euro against the dollar, the bank said, in part given low market
expectations for a so-called "coronabond".
The dollar =USD has for a month very closely tracked risk
appetite as investors and businesses fearing the worst have
rushed to the world's reserve currency.
It made gains against the pound, the yen and the Swiss
franc, as well as risk-sensitive currencies such as the New
Zealand and Australian dollars, before easing slightly.
It last stood flat against the pound GBP= at $1.2345 and
the franc at 0.9707 CHF= , and turned slightly negative against
the yen to 108.80 JPY= .
The Aussie AUD=D3 , which fell 0.6% in early European
trading after ratings agency S&P cut the outlook for its
sovereign AAA rating from stable to negative, clawed back losses
and turned positive on the day. Still, some analysts were already starting to look at the
potentially negative longer term implications for the dollar of
the extraordinary stimulus measures launched by Washington and
the U.S. Federal Reserve to lessen the economic damage caused by
the pandemic.
"If you assume that COVID-19 is tackled by the end of the
year ... in 2021 we have fiscal deficits, balance sheet
expansion, and the supply of dollars through other measures -
it's definitely a very strong background for a weaker dollar,"
said MUFG's Derek Halpenny.
Against a basket of currencies, the dollar edged up 0.1% to
100.050 =USD , giving up slightly some of its earlier advance.
EYES ON WUHAN
A Reuters tally shows 81,451 coronavirus-related deaths
globally and nearly 1.4 million infections. British Prime
Minister Boris Johnson, who is infected, remains in intensive
care although his condition is stable. There are also signs of a plateau in hospitalisations in New
York, with some European countries planning to start easing
their lockdowns with fatalities declining.
The Chinese city where the coronavirus pandemic first
emerged, Wuhan, ended a two-month lockdown on Wednesday, though
concerns over a second wave of infections remain.
"What we see and hear from Wuhan will be quite important
for whether any improvement in sentiment can be maintained,"
said Ray Attrill, head of FX strategy at National Australia
Bank.
The Chinese yuan CNY= retreated from a three-week high as
the dollar strengthened.
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