(New throughout; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Jan 28 (Reuters) - Concerns about the economic
fallout from the coronavirus outbreak in China supported
safe-haven currencies on Tuesday, with the dollar index at a
two-month high and the Swiss franc at a nearly three-year peak
against the euro.
Though global markets had stabilized somewhat after Monday's
sell-off, risk aversion in currency markets persisted, with the
Australian dollar AUD= leading losers and the greenback
strengthening to an eight-week high against a basket of six
rivals .DXY .
The Japanese yen JPY= was off of Monday's high, last 0.26%
weaker at 109.17 per dollar.
"Risk-off positioning has cooled off, though investor
sentiment clearly remains wary, faced with the epistemological
"known unknown" conundrum of how bad and how widespread and how
economically damaging the coronavirus outbreak will be, wrote
analysts at Action Economics.
President Xi Jinping said on Tuesday that China was sure of
defeating the "devil" coronavirus that has killed 106 people.
Yet despite his confidence, international alarm has risen: From
France to Japan governments organized evacuations, while Hong
Kong planned to suspend rail and ferry links with the mainland.
The Swiss franc, a traditional safe-haven investment along
with the yen and the dollar, had strengthened to 1.067 francs
per euro EURCHF= , its highest since April 2017. It had
retraced some of those gains in North American trade, last 0.28%
weaker on the day at 1.071.
Global stock markets and oil prices have tumbled in recent
days on fears the virus could further damage China's already
weakened economy. That also briefly inverted the three-month,
10-year U.S. Treasury yield curve, considered a fairly reliable
recession predictor. MKTS/GLOB Still, currency moves were subdued, with the U.S. dollar
adding to previous gains ahead of the start of a two-day U.S.
Federal Reserve meeting later on Tuesday. Fed policymakers are
largely expected to reiterate that interest rates will remain on
hold this year. The dollar index was last up 0.19% at 98.137, its highest
since early December and taking its gains so far this month to
1.8%. Versus the euro, the dollar firmed 0.15% to an eight-week
high of $1.100 EUR= .
The Australian dollar, which is highly correlated to the
Chinese economy, earlier in the session hit a fresh 15-week low
and was last trading 0.15% weaker on the day at 0.675.
Stability in the offshore yuan, after a recent drop,
provided some calm to nervous currency markets. The Chinese
currency firmed 0.19% versus the dollar CNH= , rising off
three-week lows.