February 11, 2020 / 2:27 PM / 13 days ago

REFILE-FOREX-Dollar hits highest since October as investors seek higher yields

 (Changes headline to reflect key reason for unit's advance)
    * Carry trade boosts demand for U.S. dollar
    * Coronavirus concerns maintain safety bid for greenback

    By Karen Brettell
    NEW YORK, Feb 11 (Reuters) - The dollar hit a four-month
high against the euro on Tuesday as investors chased higher
returns in the U.S., and after Federal Reserve Chairman Jerome
Powell adopted an upbeat view of the U.S. economy.
    The greenback has gained against the single currency as data
reinforces a view that the U.S. economic outlook is more
favorable than that of the euro zone, and on safety buying on
concerns about the economic impact of the coronavirus outbreak
that originated in China.
    Low volatility across most of the foreign exchange market
has also 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 non-existent in
the FX market a lot of people are piling into this short euro,
long higher beta, higher interest rate currencies.”
    At the same time, “you’re looking at a euro zone economy
that just can’t seem to get a lot of traction,” Nelson said.
“That’s also more fundamentally supporting this idea that the
euro is sort of flat on its back right now.”
    The euro fell as low as $1.0892 on Tuesday, the
lowest since Oct. 1, before rising back to $1.0907.
    Comments by Powell on Tuesday affirmed the view that the
U.S. central bank is unlikely to change interest rates in the
near term.
    Over the second half of 2019 "the economy appeared resilient
to the global headwinds that had intensified last summer,"
Powell said in remarks to the House Financial Services
Committee, as economic activity increased further and the labor
market strengthened.
    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.
    Concerns about the spread of the coronavirus also maintained
a safe haven bid for the U.S. dollar.
    The death toll in mainland China from the outbreak climbed
past 1,000 on Tuesday, but the number of new confirmed cases
    Currency bid prices at 9:11AM (1411 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.0907        $1.0909     -0.02%         -2.70%      +1.0920     +1.0892
 Dollar/Yen       JPY=        109.7600       109.7400    +0.02%         +0.83%      +109.9400   +109.7500
 Euro/Yen         EURJPY=     119.74         119.76      -0.02%         -1.82%      +120.0000   +119.6100
 Dollar/Swiss     CHF=        0.9778         0.9770      +0.08%         +1.03%      +0.9787     +0.9766
 Sterling/Dollar  GBP=        1.2953         1.2913      +0.31%         -2.31%      +1.2957     +1.2896
 Dollar/Canadian  CAD=        1.3296         1.3315      -0.14%         +2.39%      +1.3320     +1.3288
 Australian/Doll  AUD=        0.6715         0.6686      +0.43%         -4.36%      +0.6719     +0.6682
 Euro/Swiss       EURCHF=     1.0667         1.0662      +0.05%         -1.70%      +1.0679     +1.0657
 Euro/Sterling    EURGBP=     0.8420         0.8447      -0.32%         -0.40%      +0.8458     +0.8421
 NZ               NZD=        0.6400         0.6383      +0.27%         -4.99%      +0.6400     +0.6380
 Dollar/Norway    NOK=        9.2450         9.2884      -0.47%         +5.32%      +9.2917     +9.2468
 Euro/Norway      EURNOK=     10.0847        10.1348     -0.49%         +2.51%      +10.1379    +10.0870
 Dollar/Sweden    SEK=        9.6495         9.6574      -0.12%         +3.23%      +9.6736     +9.6489
 Euro/Sweden      EURSEK=     10.5262        10.5387     -0.12%         +0.54%      +10.5505    +10.5280

 (Editing by Bernadette Baum)
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