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FOREX-Riskier currencies steady as investors assess China virus fallout
Published at 29/01/2020 at 04:54

* Yuan steadies after slide to month low on Monday

* Yen and Swiss franc slightly softer

* Inflation data supports Aussie

* Graphic: World FX rates in 2020

By Hideyuki Sano and Tom Westbrook

TOKYO/SINGAPORE, Jan 29 (Reuters) - Riskier currencies steadied on Wednesday and demand for safe-havens ebbed, as investors waited for more news on the likely economic damage from a virus outbreak spreading from China.

The offshore yuan - heavily sold in recent days - was marginally stronger at 6.9551 per dollar , off Monday's 6.9900 to the dollar, which was its weakest in almost a month.

Firmer-than-expected inflation figures supported the Australian dollar from Tuesday's three-and-a-half month low to $0.6773, a gain of 0.15% for the day .

The Japanese yen was a touch weaker. Though with moves slight across the board, it is clear traders remain on edge.

"The way risk is trading, people are saying that perhaps we reached peak worries, peak fear," said Chris Weston, Head of Research at Melbourne brokerage Pepperstone.

"But it's got an uncertain feel to it...it's difficult to sell the yen or sell Swiss franc in an environment where the newsflow is still getting progressively worse, and we're not really fully able to price risk."

The newly-identified virus has created alarm because it is spreading quickly and there is little known about it. The death toll rose sharply to 132 on Wednesday with nearly 1,500 new cases, for a total of nearly 6,000 cases.

The yen was a touch weaker at 109.2 yen per dollar , while the Swiss franc edged 0.1% softer to a two-week low of 0.9744 francs per dollar.

Mainland Chinese markets are shut for Lunar New Year this week, with onshore currency and bond trading closed. Hong Kong's equity markets tumbled in their first session since the break.

Elsewhere, the euro stood at $1.1013 , having hit a two-month low of $1.0998 on Tuesday, after a strong U.S. consumer sentiment reading buoyed the greenback.

Sterling was steady at $1.3018 , having also dropped overnight as the dollar rose to a two-month high against a basket of currencies .

In Asian hours, the dollar held below that peak at 98.027.

The U.S. Federal Reserve meets later on Wednesday and is expected to keep rates on hold with a wary eye to the economy.

But some think a mere mention of risks from the coronavirus may spark speculation the Fed could dole out more stimulus in future, if the U.S. economy is hit by fallout from the outbreak.

"It is not necessarily the virus per se that is the problem for the world's economy," said Jeffrey Halley, senior market analyst for Asia Pacific at broker OANDA.

"It is the self-feeding negative feedback loop on economic activity, and thus growth, it creates...a worst-case scenario, dragging over the next few months, could even knock the Federal Reserve off autopilot trajectory."

(Reporting by Hideyuki Sano in Tokyo and Tom Westbrook in Singapore; Editing by Lincoln Feast and Kim Coghill)

((tom.westbrook@tr.com; +65 6318 4876;))