* Euro-dollar implied vol highest since Jan 2019
* Yen regains safe-haven credentials, up 0.8%
* Aussie, Norwegian crown slide as fear grips markets
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds more context, additional currencies and comments)
By Olga Cotaga
LONDON, Feb 28 (Reuters) - Volatility in the euro-dollar
exchange rate surged to its highest in more than a year on
Friday, as growing fears over a coronavirus outbreak raised
recession fears and fuelled big currency moves.
Hopes that the outbreak can be contained in China have been
replaced this week by worries that infections are spreading
around the globe. Measures to contain the virus have wreaked
havoc on supply chains, the world's economy and financial
markets.
Equity markets have tumbled, as investors dumped riskier
assets and piled into safe-haven currencies, sending the
Japanese yen, which has regained its safe-haven status after
last week's brief wobble, to a 3-1/2-week high of 108.51 versus
the dollar JPY=EBS , trading last up 0.8%.
Traders were also offloading currencies closely associated
with a possible recession, pushing the Australian dollar
AUD=D3 , much reliant on China and global economic growth, 0.5%
lower to $0.6517, its lowest in 11 years.
"The virus has turned the markets upside down," said
Marc-André Fongern, head of FX research at Fongern Global Forex.
"Stocks are collapsing, while for the foreseeable future,
abysmally poor economic figures are likely to be the rule rather
than the exception. Consequently, the Japanese yen remains the
preferred currency," he said.
Apart from jumping into safe-haven assets, money managers
also tend to reverse out of so-called carry trades in tumultuous
times. In carry trades, investors borrow in low-yielding
currencies like the euro - where interest rates are below zero -
to invest in higher-yielding ones.
With investors pulling out of higher-yielding and riskier
currencies, that has helped the euro soar to a 3-1/2-week high
of $1.1053 EUR=EBS .
"Probably there's a significant amount of carry trade unwind
that's helping to push the euro back up," said Marshall Gittler,
an analyst at BDSwiss Global.
A gauge of euro-dollar one-month implied volatility, which
fell to a record low just last month below 4%, surged to 6.6%,
the highest since mid-January last year, having ended last week
around 4.8% EUR1MO=FN .
The greenback has strengthened recently but has since handed
back those gains as money markets moved to price three 25
basis-point cuts from the Federal Reserve by September, starting
with one later this month.
As recently as a week ago, markets had seen just a 9% chance
of a cut FEDWATCH , as investors saw the U.S. economy perform
better than the rest of the world, prompting them to pile into
U.S. assets, which drove the greenback higher.
The probability of Germany unleashing a fiscal stimulus to
prop up growth has also helped sentiment in Europe, analysts
said.
Elsewhere, the Norwegian crown plummeted to a new 20-year
low of 9.4820 NOK= and the Canadian dollar fell to a
nine-month low of 1.3456 versus the U.S. dollar.