* Dollar rebounds sharply as traders seek liquidity
* Yen, euro, pound all down around 1%
* Emerging market currencies weaken to Sept 2018 levels
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds new quote, details, latest prices)
By Tommy Wilkes
LONDON, March 17 (Reuters) - The dollar's rally gathered
steam on Tuesday as nervous traders rushed to buy the most
liquid currency amid fragile sentiment and signs of growing
pressure in offshore dollar funding markets.
Market liquidity was tight and investors remained very
cautious after coordinated moves by central banks failed to
quell anxiety about the coronavirus pandemic.
Investors are now waiting to see the scale of government
fiscal responses to battle the economic fallout from the virus
and limit the economic contraction.
Money managers and businesses are scrambling for dollars as
the outlook grows darker by the day.
The U.S. currency had initially fallen in early March as
U.S. government bond yields tumbled, but the dollar has since
rebounded and measured against a basket of major currencies is
now up 4.6% in eight days.
Funding pressures in the market for dollars are growing
sharply as investors and companies rush to get their hands on
the greenback. "The biggest risk, and at the moment it's our bearish
scenario, is that this morphs into a systemic crisis," said
Guillermo Felices, a senior strategist and portfolio manager at
BNP Paribas Asset Management.
Investors have taken central bank action as insufficient
given the coronavirus's breakneck spread across the world, which
has put many nations into virtual lockdown and sparked warnings
about a brutal global recession.
The U.S. dollar index =USD on Tuesday rose 0.9% to 99.050,
its highest since Feb. 27.
The euro dropped 1.1% to $1.1059 EUR=EBS while sterling
sank to its weakest since September, down 1% at $1.2141
GBP=D3 .
The dollar rallied 1% versus the yen to 107 yen, reversing
much of Monday's loss JPY=EBS .
The Australian dollar AUD=D3 , seen as sensitive to global
growth due to the country's commodities exports, fell 1.5% to a
new 11-year low of $0.6027.
Volatility has doubled in forex markets in the space of a
few weeks, but has not been as pronounced in currency markets as
it has in equities and bonds. Analysts said that despite the
poor liquidity and large moves, trading had been relatively
orderly.
Not everyone thinks the dollar's rally will last.
"Fixing the plumbing has tended to be one of the things that
central banks can do in a crisis," said Kit Juckes, a strategist
at Societe Generale. "So this period of renewed dollar strength,
while likely to be sharp, is also likely to be short-lived."
Investors have been dumping emerging market currencies and
MSCI's emerging market currency index .MIEM00000CUS dropped
0.5%, its lowest since September 2018.
The Korean won KRW= hit its lowest since 2010. while the
Russian rouble RUB= , Mexican peso MXN= and Indian rupee
INR= all fell again. EMRG/FRX
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U.S. dollar index https://tmsnrt.rs/2WrtpI6
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(Editing by Catherine Evans)