The yen rose from a three-week low against the dollar on Thursday as investors sought safe havens after China's Hubei province, the epicentre of a coronavirus outbreak, reported a sharp jump in the number of new cases.

The Chinese yuan slipped against the dollar as the latest update on the spread of the virus provided a grim reminder to investors of the threat to the global economy, that has shaken markets in recent weeks.

Using a new method of diagnosis, Hubei on Thursday reported 14,840 fresh cases of the virus as of February 12, up from 1,638 new cases on Tuesday, with the number of deaths in the province rising by a daily record of 242 to 1,310.

“When you see numbers like this, you can't help but move to risk-off trades, which means buy the yen and sell stocks,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo. “If the authorities can reasonably explain this, things might calm down, but I expect risk aversion to continue.”

The yen rose 0.2 per cent on Thursday to 109.89 yen, pulling back from its weakest since January 21. In the onshore market, the yuan slipped 0.13 per cent to 6.9809 per dollar, while offshore the Chinese currency gave up 0.14 per cent to 6.9830.

The Australian dollar, widely used as a proxy for risk on Chinese assets, fell 0.22 per cent to $0.6724, while the New Zealand dollar dipped 0.2 per cent to $0.6453.

Both Australian and New Zealand have extensive trade ties with China, with trade in commodities, tourism and education especially vulnerable to disruption from the virus.

The New Zealand dollar had enjoyed a lift the previous day when the central bank dropped a reference to the chance of future rate cuts in its policy review. Earlier on Thursday, an assistant governor told Reuters the central bank has a “genuine neutral bias” amid improving domestic demand, but is open to reviewing that position if the economic hit from the coronavirus epidemic worsened.

The World Health Organisation has likened the epidemic's threat to terrorism, underscoring the anxiety in financial markets about its impact across businesses and trade worldwide. Chinese policy makers have implemented a raft of measures to support the economy as fears grow the coronavirus outbreak could have a damaging impact on growth in the Asian giant and globally.

Elsewhere in the currency market, the dollar traded at $1.0868 per euro, close to its strongest level in more than two years due to growing optimism about the health of the US economy. Sentiment for the greenback has turned positive since data last week showed the US labour market is improving.

In contrast, the euro wilted on Wednesday after data showed euro zone manufacturing output plunged more than expected in December, boding ill for fourth quarter euro zone gross domestic product data due on Friday. The euro changed hands at 83.91 pence on Thursday in Asia, close to its lowest since December 17.

The pound was little changed at $1.2955, having managed to inch away from 2-1/2-month lows hit at the start of the week due to encouraging economic data. But, investors remain anxious over the tough line taken by British Prime Minister Boris Johnson over trade talks with the European Union.

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