By Peter Nurse

Investing.com - The U.S. dollar continues to gain fans Wednesday, with China’s coronavirus continuing to batter economies in Asia, Europe showing very few signs of growth while the U.S. economy exhibits a reasonably healthy glow.

At 03:05 ET (0805 GMT), EUR/USD traded at 1.0798, after pushing as low as $1.0786 for the first time since April 2017. The U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 99.323, having earlier climbed as high as 99.382, at heights not seen for over two years. USD/JPY climbed 0.2% to 110.09, GBP/USD traded at 1.30, while USD/CNY traded around the physiologically important 7 level.

China, the world's second-largest economy, is still struggling to get its manufacturing sector back online after imposing severe travel restrictions to contain a virus that emerged in the central province of Hubei late last year.

Analysts polled by Reuters expect China's economic growth could slow to 4.5% in the first quarter from 6% in the previous quarter, but some recently downgraded forecasts again into the 3-4% range.

At the same time, Japan’s GDP growth shrank the fastest in six years, according to data released Monday, Hong Kong is heading for its first back-to-back annual recessions on record, and Singapore will post its biggest budget deficit since at least 1997 as it tries to support its economy.

The news in Europe isn’t much better. The German ZEW sentiment index Tuesday, the first data reading post the coronavirus hit, deteriorated badly, while a leading industry lobby stated Wednesday that the German economy, the largest in the eurozone, is unlikely to see much genuine growth this year.

At the same time, on the U.S. side, the Empire state manufacturing sector survey was stronger than expected Tuesday, moving to the highest level since spring last year, before the U.S. escalated the trade war.

This all points to more gains for the greenback ahead, particularly against the beleagured euro.

“Downside momentum in the cross thus remains intact as U.S. outperformance growth- and equity-wise dominate amid room to price out Fed cuts and positioning-wise to add USD longs, said analysts at Danske Bank, in a research note, “Technically, the move opens for a possible test of 1.06 next, which would be an undershooting of our 6-12M target of 1.07.”

Of additional interest Wednesday will be the latest rate-setting meeting by the Turkish central bank. Since Governor Murat Uysal took over in July the Monetary Policy Committee has agreed five straight rate cuts, taking Turkey’s benchmark rate to 11.25%, below zero when adjusted for inflation.