* Yen continues slide, hits 10-month low
* Dollar index hits highest since May 2017
* Australian dollar falls on weak labour market report
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, Feb 20 (Reuters) - The Japanese yen fell past 112
against the dollar to a 10-month low on Thursday, extending its
previous day's slide to post its worst two-day performance in
over two years against a broadly strengthening greenback.
A run of dire economic news out of Japan has stirred talk
the country is already in recession and that Japanese funds were
dumping local assets in favour of U.S. shares and gold.
"The strongest explanation (for the yen's current decline)
is a widespread selling by Japanese asset managers amid growing
fears about the health of Japan's economy," said Raffi
Boyadijan, investment analyst at XM.
Improving risk appetite in global markets has also hit the
yen, which usually tends to benefit in times of market stress.
China reported a drop in new coronavirus infections on
Thursday, but scientists warned the pathogen may spread more
easily than previously believed as two elderly passengers from a
ship quarantined in Tokyo became the latest to die. China also cut its benchmark lending rate on Thursday, as
widely expected, as the authorities move to lower financing
costs for businesses. By midday in London, the yen traded at 111.93 to the dollar,
having earlier breached the 112 mark to hit the day's low of
112.18 JPY= .
"There's a combination of factors (for the yen weakness) - a
broader strengthening of the dollar on the back of the
coronavirus which is making the dollar more attractive across
the board," said Lee Hardman, currency strategist at MUFG in
London.
"To a degree, it was a catch-up move."
Hardman also noted a pickup in purchases of foreign bonds
and equities by Japanese investors during dips in the yen in
recent weeks.
The euro was 0.1% lower at $1.079 EUR=
The dollar also rose 0.3% on the Chinese yuan CNY= to
7.0215 and the Australian dollar AUD=D3 sank to 11-year lows
at $0.6630 on a weaker-than-expected employment report.
Against a basket of peers, the greenback hit its highest
since April 2017 and is now up over 3.5% this year. .DXY
"The critical thing to understand is the Yen weakness is not
so much "Risk on" as it is Japanese asset managers heading for
the Tokyo market exit in droves," said Stephen Innes, Asia
Pacific Market Strategist at AxiCorp.
"With the USD inflow unyielding, it's unclear what could
stem this tide other than U.S. administration talking down the
dollar."
U.S. President Donald Trump has long protested that the
dollar was too strong and unfairly penalising U.S. business.