* Euro firm as euro/dollar carry trade pared back
* Investors bet on Fed rate cut at March 17-18 or even
earlier
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Hideyuki Sano and Tom Westbrook
TOKYO/SINGAPORE, March 2 (Reuters) - The dollar was on the
back foot on Monday as growing expectations of U.S. interest
rate cuts to cushion the impact of the coronavirus stemmed some
safety flows into the greenback.
After U.S. shares were routed in recent days, Federal
Reserve Chairman Jerome Powell said on Friday the central bank
will "act as appropriate" to support the economy. Investors took his comments as a hint the Fed will deliver a
cut when it meets from March 17-18, and as an encouragement to
central banks around the world to follow suit.
"This statement is likely to be seen as a 'call to action'
for other central banks around the world," Westpac chief
economist Bill Evans said.
The dollar ceded ground to the Aussie, euro, pound and yuan.
The euro last traded 0.3% firmer at a month-high of $1.059.
The Australian dollar rose 0.4% to $0.6531 AUD=D3 and the
pound GBP= edged 0.2% higher to $1.2939.
Yet the expectations around the Fed, with futures now
implying a 50 basis point cut 0#FF: , also underscore the scale
of the virus' spread and how deeply markets are on edge -
keeping a lid on moves.
"It's a bit of a dilemma today between celebrating Fed cut
prematurely and really selling off risk," said Vishnu Varathan,
head of economics at Mizuho Bank in Singapore, especially since
it will likely take more than cuts to offset the virus' damage.
"What's most important, to quote Jerry Maguire, is 'show me
the money'. It's not so much about the interest rate - a 25
basis point interest rate cut is not going to make a business
that cannot find cashflow feel better," he said.
There is also increasing chatter of an unscheduled move,
with a U.S. bank lobby economist saying a coordinated cut by top
central banks could happen as early as Wednesday. Bank of Japan Governor Haruhiko Kuroda has already hinted at
action, issuing a statement to say the central bank would take
necessary steps to stabilise financial markets. Kuroda's comments curtailed gains in the Japanese yen
JPY= , which fell 0.2% to 108.30 per dollar.
Dragging sentiment in the other direction were more reports
of the virus' relentless spread and economic damage.
Health officials in Washington state confirmed the second
U.S. death from the virus, saying late Sunday that a nursing
home resident had died.
New York's governor confirmed his state's first positive
case. In China, two surveys showed factories were dealt a
devastating blow in February as the outbreak triggered the
sharpest contraction in activity on record. "If upcoming data undershoots market expectations, that will
weigh on sentiment further," said Kyosuke Suzuki, director of
currency trading at Societe Generale.
Still, helped by the dollar's softness and signs of
stabilisation in the epidemic in China, the yuan CNY= jumped
to a near three-week high of 6.9703 per dollar. CNY/
The next closely-watched data points are euro zone
manufacturing surveys due at 0900 GMT and the U.S. ISM survey
due at 1500 GMT.