* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Feb 5 (Reuters) - The dollar climbed towards a
recent two-month high on Wednesday on the back of firmer Asian
markets and expectations Beijing will manage to limit the spread
of a deadly virus, though the yen's strength indicated broader
sentiment remained cautious.
Against a basket of its rivals .DXY , the dollar rose 0.1%
to 98.02, advancing for a third consecutive day, and within
striking distance of a two-month high of 98.19 hit last week.
Its gains were most prominent against the Norwegian crown
NOK=D3 , which failed to draw any support from firmer oil
prices. Norway is a major exporter of oil.
"FX markets are slightly optimistic as the infection rate
from the deadly China virus seems to have slowed somewhat but
still remains high at double digit rates," said Thu Lan Nguyen,
a FX strategist at Commerzbank based in Frankfurt.
Though the dollar has veered between acting as a classic
safe-haven asset during times of trade-war tensions and
benefitting from its status as a high-yielding currency in the
developed market space in 2019, the opening days of 2020 have
seen the greenback's correlation with risky assets strengthening
considerably.
As a result, the dollar weakened last week as news of the
spreading China virus hit risk sentiment globally, with only
stocks and risky assets gaining this week as China's response to
the coronavirus outbreak raised hopes it could be contained,
even as the death toll rose sharply.
With more than 99% of confirmed cases confined to China,
drastic quarantine measures in place and the central bank
pouring trillions of yuan into the financial system, investors
have partially unwound their recent flight to safety.
Still, the yen remained supported, with the Japanese
currency rising 0.2% to 109.30 against the dollar, unwinding
some of its hefty losses sustained against the dollar in the
previous session.
The Australian dollar bounced from a four-month trough of
$0.6679 to $0.6737, with hawkish comments from the central bank
chief offering extra support AUD=D3 However, a slightly weaker yuan and a collapse in the
Singapore dollar, after hints at virus-driven policy easing,
show that an abundance of caution remains.
The Chinese currency in the offshore market edged 0.2% lower
against the dollar CNH=D3 and remained supported around the 7
yuan per dollar level.