- Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
- Dollar stands tall before NFP report
- Traders closely watching China virus fallout
- Safe-havens head for weekly decline
The dollar traded near a two-week high versus the yen on Friday on upbeat U.S. economy indicators ahead of key jobs data, but the spread of a new coronavirus in China remains a risk to financial markets.
The yuan held onto slim gains versus the dollar in offshore trade on hopes Chinese stimulus would lessen the economic impact of the epidemic, but the rising death toll has kept investors on edge.
Sterling traded near a six-week low against the greenback and a nursed losses versus the euro, dogged by persistent worries about negotiations between Britain and the European union for a post-Brexit trade deal.
Recent improvement in U.S. economic data has given some traders respite from concerns about the new virus, but these concerns are likely to loom large for weeks as investors asses the scale of the economic impact.
"There is a perception that the U.S. economy will be less affected by the virus than China or other countries, so that is a factor for dollar strength," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
"Risk-off trades could take a break because we won't know the true state of China's economy until we see data for February. There could be some big declines in the numbers for China and other Asian countries."
The dollar traded at 109.97 yen JPY=EBS on Friday in Asia, just below a two-week high hit earlier. For the week, the dollar was on course for a 1.5% increase versus the yen, which would be its biggest weekly gain since July 2018.
In the offshore market, the yuan CNH=D3 held steady at 6.9790 per dollar.
For the week, the offshore yuan was on course for a 0.35% gain, supported by central bank stimulus and a surprise cut in Chinese tariffs on U.S. imports.
For now, the focus has shifted to the closely-watched U.S. nonfarm payrolls report due later on Friday, which is forecast to show job creation accelerated in January.
The mood for the dollar improved on Thursday after unemployment benefits dropped to a nine-month low and worker productivity rose.
Data earlier this week showing a rebound in U.S. manufacturing has also boosted the dollar's fortunes.
The U.S. optimism contrasts starkly with the jitters in Asia as investors count the human toll of the virus and try to measure how travel restrictions and business closures will impact activity in the world's second-largest economy.
The yen and the Swiss franc, two currencies sought as safe-havens, initially gained as the coronavirus epidemic unfolded last month, but both currencies reversed course this week.
Against the dollar, the Swiss franc CHF=EBS traded at 0.9747, headed for its biggest weekly decline since August 2019.
Sterling found itself on the backfoot as concerns about Britain's relationship with the EU following its exit from the bloc returned.
Investors are nervous that British Prime Minister Boris Johnson is taking a hard line in the trade talks with the EU, which need to conclude before the end of the year to avoid a potentially disruptive break in trading relations.
The pound GBP=D3 was little changed at $1.2932, close to the lowest since Dec. 25 and down 2% for the week.
Sterling EURGBP=D3 traded at 84.97 pence per euro, on course for a 1.1% weekly decline.
