By Hideyuki Sano
TOKYO, Jan 29 (Reuters) - Risk currencies steadied on
Wednesday as investors took stock of the economic damage from
the outbreak of the coronavirus originating in China, with focus
on Hong Kong shares that will resume trading later in the day
after the Lunar New Year break.
As countries step up efforts to contain the spread of the
deadly new virus, flight-to-quality bids in safe-haven
currencies such as the yen and the Swiss franc subsided for now.
The Australian dollar fetched $0.6758 AUD=D4 , steady on
the day and a tad above from Tuesday's 3 1/2-month low of
$0.6737.
The offshore yuan traded flat at 6.965 yuan per dollar
CNH= , off Monday's 6.9900 to the dollar, which was its weakest
in almost a month.
While mainland Chinese markets will remain shut this week,
markets will open in Hong Kong, where a lot of Chinese firms are
listed, on Wednesday.
The euro stood at $1.1021 EUR= , having hit a two-month
low of $1.0998 in U.S. trade on Tuesday.
That helped to lift the dollar index =USD to a two-month
high.
The yen traded at 109.16 yen per dollar JPY= , off Monday's
three-week high of 108.73. It posted its first loss in five days
on Tuesday.
President Xi Jinping said on Tuesday that China was sure of
defeating the "devil" coronavirus while international alarm was
rising as the outbreak spread across the world. "The number of patients and death toll is rising day by day,
nor do we know when vaccine will be ready," said Daisuke Uno,
chief strategist at Sumitomo Mitsui Bank.
"Yet, at the very base of market there is underlying
optimistic sentiment, limiting risk-off moves," he said.
Behind investors' tolerance of risks are their expectations
of policy support from the world's central banks.
The U.S. Federal Reserve has cut interest rates three times
last year and expanded its balance sheet rapidly after ructions
in U.S. bond repo market, a key dollar funding market, in
September. The Fed is expected to keep its policy on hold later on
Wednesday and is likely to repeat its mantra that a "material
reassessment" of the economic outlook would be required for any
change in interest rates.
But some think a mere mention of risks from the coronavirus
may spark speculation the Fed could dole out more stimulus if
the U.S. economy is hit by fallouts from the outbreak.
Elsewhere, sterling traded at $1.3028 GBP=D4 , off one-week
low of $1.2976 set on Tuesday, capped by worries about Britain's
future relationship with the European Union.
Prime Minister Boris Johnson's decision to grant Huawei a
limited role in Britain's 5G mobile network is also said to have
undermined the currency. Traders feared the move may frustrate the United States,
which is trying to exclude the Chinese telecoms giant from the
West's next-generation communications, putting the future of any
U.S.-UK trade pact in doubt.