January 22, 2020 / 3:10 PM / a month ago

FOREX-Safe-haven currencies slip as China virus worries ebb

* Investors shake off China virus worries

* Sterling gains further as BoE rate-cut fears recede (Recasts, updates rates, adds comments from after open of U.S. market; new byline, dateline; previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Jan 22 (Reuters) - The U.S. dollar edged lower on Wednesday and the Japanese yen and the Swiss franc slipped amid muted demand for safe haven units as updates from China about the spread of a new flu-like coronavirus raised hopes the outbreak would be contained.

The dollar index, which measures the greenback against six other major currencies, was down 0.03% at 97.506.

Deaths from China’s new flu-like virus rose to nine on Wednesday, with more than 470 confirmed cases, heightening global fears of contagion from an infection suspected to have come from animals.

But China’s response and candor - in contrast to how it handled the 2002-03 Severe Acute Respiratory Syndrome (SARS) epidemic - helped reassure investors concerned about the possible global fallout.

“The virus concern is settling down a bit overnight as the market is getting a little more transparency around the issue from China and other nations than they did with SARS for example,” Brad Bechtel, managing director, Jefferies in New York, said in a note.

Against the safe-haven yen and the Swiss franc, which tend to draw investors during times of geopolitical or financial stress, the dollar was moderately stronger on the day.

The dollar was 0.04% higher against the Japanese currency, and up 0.08% against the franc.

“Doesn’t mean we are out of the woods on this issue just yet as I still expect a steady drone of negative headlines until we truly have everything contained but for now things have settled,” he said.

The franc was pressured this week after data indicated the country’s central bank had stepped up its intervention in the market to stop its currency from appreciating.

The Swiss National Bank, which has had an interventionist approach to the franc as it struggles to boost inflation in the highly export-oriented economy, declines to talk about its currency management policy. However, investors use weekly sight deposit data as a proxy to estimate how active it has been in the currency markets.

Data published on Monday showed an increase in the amount of cash that domestic commercial banks hold with the Swiss National Bank.

Britain’s pound rose 0.67% against the dollar as investors debated whether or not the Bank of England would cut interest rates when it meets next week.

The Canadian dollar was down 0.4% against the greenback after the Bank of Canada maintained its key overnight interest rate at 1.75% as expected on Wednesday, but opened the door to a possible cut should a slowdown in growth drag on.

Reporting by Saqib Iqbal Ahmed; Editing by Bernadette Baum

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