* 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 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 on Tuesday rose 0.3% to 98.444, close to its recent high of 98.817.
The euro dropped 0.5% to $1.1130 while sterling sank to its weakest since September, down as much as 0.6% at $1.2192.
The dollar rallied 1% versus the yen to 107 yen, reversing much of its losses on Monday.
The Australian dollar, 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 dropped 0.3%, staying at its lowest level since late 2018. The Korean won hit its lowest since 2010.
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." (Additional reporting by Hideyuki Sano in Tokyo; Editing by Catherine Evans)