February 3, 2020 / 8:28 PM / 2 months ago

FOREX-Yen, Swiss franc slide as China takes measures to limit virus impact

    * Yen, Swiss franc weakness signals ebbing virus fears
    * Offshore yuan at seven-week low, euro dragged downwards 
    * China cuts reverse repo rates, injects liquidity
    * U.S. manufacturing index unexpectedly rises in January
    * Sterling tumbles after UK PM takes tough line in EU talks
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds new analyst comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 3 (Reuters) - The safe-haven yen and Swiss franc declined on Monday, as risk sentiment
improved and fears about the coronavirus eased after China took measures to cushion the economic impact of
the new epidemic and pledged to do more to contain it.
    China's offshore yuan dropped to a more than seven-week low against the U.S. dollar on Monday, but
trimmed its losses as New York trading got under way.
    After rising to multi-week highs against the dollar last week in the face of the coronavirus scare,
the yen and Swiss franc took a pause from their climb as markets cheered China's efforts.
    China's central bank unexpectedly lowered interest rates on reverse repurchase agreements by 10 basis
points and injected 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo
operations on Monday.
    Chinese authorities also pledged to use various monetary policy tools to ensure liquidity remains
reasonably ample and to support firms affected by the virus epidemic. The crisis has so far
claimed 361 lives in China and 1 in the Philippines.
    "There was a turnaround in risk sentiment as the sell-off in stocks and the buying of safe-havens last
week were a bit overdone," said John Doyle, vice president of dealing and trading at Tempus, Inc in
    "But to be honest, I don't think there was any difference on the state of the virus between Friday and
Monday. I guess markets like the fact that China is being pro-active in trying to contain the virus and in
easing the impact on its economy," he added.
    Chinese markets still took a beating in the first trading session after an extended Lunar New Year
break. The offshore yuan dropped as low as 7.023 yuan per dollar. The dollar was last up 0.2%
against the Chinese currency at 7.014 yuan.
    In afternoon trading, the dollar rose 0.3% against the yen to 108.67, off a three-week low set
on Friday.
    The dollar also extended gains versus the yen after data showed the Institute for Supply Management's
U.S. manufacturing index unexpectedly rose in January.
    "With global growth stabilizing in recent months and domestic demand also starting to pick up, the ISM
survey adds to the evidence that 2020 is likely to be a better year for U.S. manufacturers," said Andrew
Hunter, senior U.S. economist, at Capital Economics in London.
    The Swiss franc also fell against the dollar, which climbed 0.3% to 0.9660 franc.
    Gains against the yen and Swiss franc pushed the dollar index up 0.4% at 97.805.
    The euro also fell 0.3% versus the dollar to $1.1062.
    Sterling, meanwhile, tumbled after Britain laid out a tough opening stance for future talks with the
European Union following its departure from the bloc last week.
    Sterling was last down 1.6% at $1.3030, retracing  all of its gains following the Bank of
England's decision last week to keep interest rates on hold.
    Currency bid prices at 3:13 PM (2013 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1060        $1.1093     -0.30%         -1.34%      +1.1095     +1.1037
 Dollar/Yen       JPY=        108.6800       108.3800    +0.28%         -0.17%      +108.7900   +108.3200
 Euro/Yen         EURJPY=     120.21         120.20      +0.01%         -1.43%      +120.3700   +119.9300
 Dollar/Swiss     CHF=        0.9662         0.9630      +0.33%         -0.17%      +0.9668     +0.9631
 Sterling/Dollar  GBP=        1.2998         1.3199      -1.52%         -1.97%      +1.3214     +1.2983
 Dollar/Canadian  CAD=        1.3294         1.3235      +0.45%         +2.37%      +1.3303     +1.3228
 Australian/Doll  AUD=        0.6689         0.6691      -0.03%         -4.73%      +0.6707     +0.6682
 Euro/Swiss       EURCHF=     1.0688         1.0688      +0.00%         -1.51%      +1.0693     +1.0664
 Euro/Sterling    EURGBP=     0.8509         0.8400      +1.30%         +0.64%      +0.8519     +0.8401
 NZ               NZD=        0.6463         0.6462      +0.02%         -4.05%      +0.6476     +0.6454
 Dollar/Norway    NOK=        9.2830         9.1991      +0.91%         +5.75%      +9.2892     +9.1852
 Euro/Norway      EURNOK=     10.2677        10.2180     +0.49%         +4.37%      +10.2746    +10.1748
 Dollar/Sweden    SEK=        9.6459         9.6261      -0.04%         +3.19%      +9.6709     +9.6167
 Euro/Sweden      EURSEK=     10.6702        10.6747     -0.04%         +1.92%      +10.6911    +10.6510
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve Orlofsky and Nick Zieminski)
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