(New throughout; changes dateline, previous LONDON)
NEW YORK, Jan 29 (Reuters) - Demand strengthened for the
dollar index and the safe-haven Japanese yen firmed modestly by
midmorning on Wednesday as a risk-off tone returned to markets
amid continued uncertainty about the economic fallout of the
coronavirus outbreak.
Although markets had calmed somewhat overnight and appetite
for risk assets returned, weakening the yen and Swiss franc,
continued uncertainty about the impact of the virus on China and
the knock-on effects globally has kept investors wary.
"The session turned to a risk-off tone over the last hour,"
said Greg Anderson, global head of foreign exchange strategy at
BMO Capital Markets.
The yen JPY= was last 0.07% stronger at 109.05 per dollar.
Against the euro the yen EURJPY= was 0.24% stronger at 120.01.
The offshore Chinese yuan CNH= - heavily sold in recent
days - was roughly unchanged on the day, last trading at 6.968.
The Australian dollar AUD= , highly exposed to the Chinese
economy, has fallen 1.35% since Friday's close, and was last
down 0.35% at 0.674.
The dollar index .DXY , which weighs the greenback against
a basket of six major currencies, held near two-month highs,
last trading up 0.9% at 98.109. The dollar index, a safe-haven
asset, has remained bid this week even amid momentary reprieves
in market anxiety about the coronavirus.
"Even though the coronavirus is issue number one, we're not
going to move asset prices very far until the FOMC," said
Anderson, referring to the end of a meeting on Wednesday of the
U.S. Federal Reserve's policymaking Federal Open Market
Committee.
"I think that maybe buildup to that is what had the dollar a
little bit bid overnight, even though we were in risk-on mode at
that moment."
The Fed will conclude its two-day policy meeting on
Wednesday afternoon with a statement at 2 p.m. EST (1400 GMT)
followed by a news conference with bank Chair Jay Powell. The
central bank is widely expected to keep interest rates on hold,
but investors will be watching for statements about the balance
sheet and the effects of the coronavirus on the global economy.
"One of the key issues we'll have to hear about from Powell
is what the Fed's reaction plan if coronovirus hits the U.S. and
it spreads the way that it has in China," Anderson said. "That's
probably the biggest point of intrigue for this afternoon, with
the secondary point being whether they hike the IOER by five
basis points."