In This Article:
* A$, NZ$, British pound slip, emerging market currencies tumble
* Yen gains vs dollar; euro also supported
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Hideyuki Sano and Tom Westbrook
TOKYO/SINGAPORE, April 1 (Reuters) - The dollar gained broadly against riskier currencies on Wednesday, with markets staring at what is likely to be one of the worst economic contractions for decades as the world locks down to fight the coronavirus pandemic.
The greenback advanced against the Australian and New Zealand dollars, sterling, and most emerging market currencies as fresh selling in global shares highlighted growing risks from the pandemic that has shown little sign of abating.
The Australian dollar dropped 0.35% to $0.6115 and the New Zealand dollar fell 0.3% to $0.5945 while The British pound shed 0.4% to $1.2376.
Emerging market currencies were hit harder, with the Mexican peso falling more than 1% to 23.960 to the dollar, while the South African rand gave up 0.7% to 17.952 per dollar. Most Asian currencies also dropped.
While the dollar's status as the world's reserve currency makes it a natural safe haven, investors also flocked to the safe-haven yen, which gained 0.2% against the dollar to 107.33 per dollar.
The euro eased 0.2% to $1.1015 but gained against most other currencies as its vast liquidity is attractive at times of economic stress.
"In my view, markets have still not fully priced in the damage from the coronavirus, with some people still talking about V-shaped recovery," said Masahiko Loo, portfolio manager at Alliance Bernstein in Tokyo.
"The U.S. and Europe are hit by the first wave now, but as you can see in Asia, there could be more waves from re-imported cases. Human psychology also does not quickly recover either after an experience like this."
The dollar held beneath overnight highs against most majors and was well below multi-year peaks made last month, before the Fed pumped more dollars into the system to calm markets.
The Fed on Tuesday broadened the ability of dozens of foreign central banks to access dollars during the coronavirus crisis by allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.
"The whole experience is testing the maxim in the market of 'don't fight the Fed,'" said Kyle Rodda, analyst at broker IG Markets in Melbourne.
"The Fed clearly wants to do everything it can necessary to ensure dollar liquidity, which puts downward pressure on the dollar," he said.
"But by the same token there is still this very structural push to buy dollars right now because liquidity is coming at an absolute premium with so much risk in the market."