February 11, 2020 / 3:27 PM / 6 days ago

FOREX-Dollar recedes from four-month highs as risk appetite improves

    * Dollar retreats as risk sentiment improves
    * Carry trade has boosted demand for U.S. dollar
    * Fed's Powell affirms that Fed on hold

 (Recasts with euro bounce, adds quote, updates prices)
    By Karen Brettell
    NEW YORK, Feb 11 (Reuters) - The dollar retreated from a
four-month high against the euro on Tuesday as risk appetite
improved, following a weeklong rally as investors chased higher
returns in the United States.
    The S&P 500 and the Nasdaq opened at all-time
highs on Tuesday after China's foremost medical adviser on the
coronavirus outbreak said the epidemic may peak this month.
    The death toll in mainland China from the outbreak climbed
past 1,000 on Tuesday, but the number of new confirmed cases
    "There’s been a bit of a disjoint with the way the equity
market has been trading in the last couple of sessions and the
way the FX markets have been moving, and I think to some degree
we’re seeing a bit of catchup on the FX side of things," said
Bipan Rai, North American head of FX strategy at CIBC Capital
Markets in Toronto.
    Concerns about the economic impact of the coronavirus have
added a safety bid for the greenback in recent sessions, while
economic data has boosted the view that the U.S. economic
outlook is stronger than the euro zone's.
    The dollar has also gained as low volatility across most of
the foreign exchange market has encouraged investors to seek out
carry trades, where they borrow in low-yielding currencies such
as the euro and the franc and invest in dollars or other
high-yielding currencies.
    “One of the big prevailing narratives right now is for the
carry trade,” said Erik Nelson, a currency strategist at Wells
Fargo in New York. “As volatility seems to be nonexistent in the
FX market, a lot of people are piling into this short euro, long
higher beta, higher interest rate currencies.”
    The euro fell as low as $1.0892 on Tuesday, the
lowest since Oct. 1, before bouncing back to $1.0921.
    Comments by Federal Reserve Chairman Jerome Powell on
Tuesday affirmed the view that the U.S. central bank is unlikely
to change interest rates in the near term.
    With risks like trade policy uncertainty receding and global
growth stabilizing, Powell signaled he saw no reason to adjust
U.S. interest rates, unless new developments cause a "material
reassessment" to the current outlook.
    Currency bid prices at 10:08AM (1508 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.0921        $1.0909     +0.11%         -2.58%      +1.0923     +1.0892
 Dollar/Yen       JPY=        109.8300       109.7400    +0.08%         +0.89%      +109.9400   +109.7500
 Euro/Yen         EURJPY=     119.95         119.76      +0.16%         -1.64%      +120.0000   +119.6100
 Dollar/Swiss     CHF=        0.9774         0.9770      +0.04%         +0.98%      +0.9787     +0.9766
 Sterling/Dollar  GBP=        1.2960         1.2913      +0.36%         -2.26%      +1.2968     +1.2896
 Dollar/Canadian  CAD=        1.3281         1.3315      -0.26%         +2.27%      +1.3320     +1.3281
 Australian/Doll  AUD=        0.6732         0.6686      +0.69%         -4.12%      +0.6735     +0.6682
 Euro/Swiss       EURCHF=     1.0675         1.0662      +0.12%         -1.63%      +1.0679     +1.0657
 Euro/Sterling    EURGBP=     0.8424         0.8447      -0.27%         -0.35%      +0.8458     +0.8421
 NZ               NZD=        0.6415         0.6383      +0.50%         -4.77%      +0.6416     +0.6380
 Dollar/Norway    NOK=        9.2361         9.2884      -0.56%         +5.21%      +9.2917     +9.2370
 Euro/Norway      EURNOK=     10.0893        10.1348     -0.45%         +2.56%      +10.1379    +10.0830
 Dollar/Sweden    SEK=        9.6287         9.6574      -0.21%         +3.01%      +9.6736     +9.6298
 Euro/Sweden      EURSEK=     10.5167        10.5387     -0.21%         +0.45%      +10.5505    +10.5176

 (Reporting by Karen Brettell; editing by Bernadette Baum and
Jonathan Oatis)
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