FOREX-U.S. dollar struggles to make headway as traders price in more Fed cuts
* Dollar steady against euro, falls versus safe-haven yen
* Canadian dollar weaker as BoC leaves room for more cuts
* Sterling rises as BoE resists pressure of easing policy
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, March 5 (Reuters) - The U.S. dollar struggled on Thursday as traders priced in more monetary policy easing by the Federal Reserve after it cut interest rates by 50 basis points this week in an emergency move to shield the economy from the coronavirus spread.
Analysts highlighted the fact that the Fed had mentioned the virus 48 times in its latest Beige Book report, compared with no mentions before, suggesting policymakers were highly concerned about the virus' negative effect on the economy.
"The reports in the Beige Book are likely to have been important for the Fed's inter-meeting rate cut," said Olle Holmgren, chief strategist at SEB.
Money markets were pricing in another 25 bps cut from the current 1% to 1.25% range at the next Fed meeting on March 18-19 and a 50 bps cut by April.
As a result, the greenback remained close to the two-month low of 1.1214 it fell to against the euro on Tuesday, last trading neutral at 1.1132 versus the common currency. The euro had also benefited earlier from traders unwinding their carry trade positions, analysts said.
Lee Hardman, currency analyst at MUFG, said "sharper euro falls could emerge quickly" if the coronavirus spreads further in the euro zone. "Further euro depreciation may follow despite its outperformance of late," he said.
Versus the safe-haven Japanese yen, the weakness in the U.S. currency was more pronounced. Dollar-yen was last down by 0.3% at 107.28, not far from the five-month low of 106.85 if plunged to on Wednesday.
Very low U.S. yields and the prospect of even more monetary easing held back gains in the dollar, though strong data showing U.S. services activity at a one-year high had pushed the greenback higher against the euro in Asian trading.
The strong performance of former Vice President Joe Biden in the Democratic nomination campaign had also pulled the dollar firmer. Biden is considered less likely to raise taxes and impose new regulations on business than rival Bernie Sanders.
But deep concern about the widening fallout from the coronavirus outbreak weighed more strongly on the dollar and other main currencies. Mainland China reported a rise in new infections on Thursday, deaths are mounting globally, Italy has closed its schools and California has declared a state of emergency as cases there increase.
The Canadian dollar followed suit from its U.S. counterpart and was down 0.2% against the greenback at 1.3407, in the aftermath of Bank of Canada joining the Fed in cutting interest rates by 50 bps - its largest cut in 10 years - and leaving the door open to further easing.
Falling oil prices also put pressure on the loonie.
The Bank of England has refused for now to give in to the pressure, leaving rates unchanged for now. Sterling, as a result, hit a six-day high of $1.2903 and a three-day high versus the euro of 86.22 pence.
Money markets, however, are pricing in a full 25 bps rate cut on March 26, incoming governor Andrew Bailey's first policy meeting.
Traders will be watching later in the day the release of initial jobless claims and factory orders in the U.S. Both data sets are expected to be weaker. (Reporting by Olga Cotaga; Editing by Andrew Cawthorne)
