The dollar struggled to make headway on Thursday, as very low US yields and the prospect of even more monetary easing held back gains, while virus fears supported the safe-haven yen. Strong data showing US services activity at a one-year high and hiring growth had pushed the greenback 0.3 per cent higher on the euro overnight.

But with benchmark US 10-year yields just a tad above 1 per cent and futures markets pricing another 50 basis points of Federal Reserve cuts by July, the greenback failed to forge ahead in Asia, leaving the euro steady at $1.1136.

“The ongoing decline in U.S. yields and the rise in volatility is continuing to cause a position squeeze,” said Ray Attrill, head of FX strategy at National Australia Bank. “Assuming that the Fed is going to enact several more rate cuts in the next month or two - including out of the 17-18 March meeting, then for the short term at least there is some further weakness in the US dollar to play out.”

An emergency 50 basis point interest rate cut by the Fed on Tuesday had sent the dollar backwards against most Asian currencies and down to a five-month low of 106.84 yen.

The strong performance of former Vice President Joe Biden in the Democratic nomination campaign had pulled the dollar firmer than that overnight, with an increase in risk appetite drawing investors away from the safety of the Japanese currency. Biden is considered less likely to raise taxes and impose new regulations on business than rival Bernie Sanders.

But deep concern about the widening economic fallout from the coronavirus outbreak had the yen rising 0.2 per cent through Thursday and last trading at 107.33 per dollar.

Mainland China reported a rise in new infections on Thursday, deaths are mounting deaths globally, Italy has closed its schools and California has declared a state of emergency as cases there increase.

The International Monetary Fund now expects world growth will drop to its slowest since the 2008-2009 financial crisis.

All of which, combined with the expectation of more monetary easing to offset the damage, snuffed a rally in the Australian and New Zealand dollars. The Aussie, which has climbed nearly 3 per cent from an 11-year low hit last week, eased to $0.6619. The kiwi, which has climbed almost 2 per cent from a Monday trough, sat at $0.6297.

“The talk of the town now is what does quantitative easing look like in Australia, when is it likely to be deployed and how much of that is priced in,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

Central bank action also weighed on the Canadian dollar, which slipped lower after the Bank of Canada delivered its biggest interest rate cut in more than 10 years. The loonie last traded at 1.3396 per dollar.

The British pound held overnight gains after the incoming Bank of England governor said he would wait for more clarity about the virus before moving interest rates, rather than rushing to an emergency cut. The pound last bought $1.2873 and traded at 86.51 pence per euro.

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