FOREX-Dollar stands tall as nervous investors stick with safety

* Dollar rebounds vs yen, sends sterling to 6-month low
* Investors stick with dollars, sell riskier currencies
* Emerging market currencies weaken further
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, March 17 (Reuters) - The dollar stood tall on
Tuesday, recouping losses against the yen and hitting new highs
against riskier currencies, as nervous traders stuck with the
most liquid currency amid very fragile sentiment.
Market liquidity was tight and investors remained very
cautious after coordinated moves by central banks failed to
quell anxiety about the coronavirus pandemic.
Investors are now waiting to see the scale of government
fiscal responses to battle the economic fallout from the virus
and limit the economic contraction.
Money managers and businesses are scrambling for dollars as
the outlook grows darker by the day. China has reported a fresh
rise in cases. Malaysia is preparing to enter lockdown amid ever
tighter measures in Europe and the United States.
"The dollar can hold onto its gains as markets
understandably remain very fragile, but when the dust settles,
we think the dollar will end up a little lower," ING analysts
said, while adding that the best level for the dollar index
would be between 99 and 100.
The U.S. dollar index =USD on Tuesday rose 0.3% to 98.444,
close to its recent high of 98.817.
The euro dropped 0.5% to $1.1130 EUR=EBS while sterling
sank to its weakest since September, down as much as 0.6% at
$1.2192 GBP=D3 .
The dollar rallied 1% versus the yen to 107 yen, reversing
much of its losses on Monday JPY=EBS .
The Australian dollar AUD=D3 , seen as sensitive to global
growth due to the country's link to commodities, fell 0.7% to a
new 11-year low of $0.6065.
Volatility, which has doubled in forex markets in the space
of a few weeks, has not been as pronounced in currency markets
as it has in equity and bond markets, and analysts said that
despite the poor liquidity and large moves, trading had been
relatively orderly.
Investors are also shunning many emerging market currencies.
MSCI's emerging market currency index .MIEM00000CUS
dropped 0.3%, staying at its lowest level since late 2018. The
Korean won KRW= hit its lowest since 2010. EMRG/FRX
Investors have taken central bank action from the U.S.
Federal Reserve and policymakers in Japan, Australia, New
Zealand and elsewhere, as insufficient given the pathogen's
breakneck spread across the world which has put many nations on
virtual lockdowns.
Some analysts said the hasty moves may have backfired.
"Central banks are pressing the gas pedal to the floor. But
the car is bogged down in a quagmire that is called coronavirus,
so it won't move forward," said Ayako Sera, market strategist at
Sumitomo Mitsui Trust Bank.
"Until the outbreak stops, for investors, it is time for
patience."