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FOREX-Dollar resumes decline; sterling rebounds after BoE rate cut

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 The U.S. dollar resumed its descent against the Japanese yen and Swiss franc on Wednesday as fears over the spreading coronavirus pushed investors into safe havens, while the British pound recovered after Bank of England unexpectedly cut interest rates.

Central banks and governments around the world are scrambling to limit the economic damage of the coronavirus outbreak, which has sent stock markets into a tailspin as investors head for the safety of government bonds.

Sterling initially fell as much as 0.4% against the dollar and 1.2% against the euro after the BoE's cut its benchmark rate by 50 basis points, to 0.25%. the pound rebounded as the move - including actions to support bank borrowing - reassured some investors. The pound rose to $1.2955 GBP=D3 , up 0.6% on the day.

Against the euro, the pound was last up 0.1% at 87.38 pence per euro. EURGBP=D3

Britain's finance minister, Rishi Sunak, is expected to direct further firepower at the British economy in his first budget later on Wednesday, expected at 1230 GMT.

The dollar was down particularly sharply against the safe-haven Japanese yen and Swiss franc. It lost 0.5% to 105.11 yen JPY= after earlier falling more than a full yen from Tuesday's high of 105.915.

The U.S. currency had fallen as low as 101.18 on Monday. While Japan may already be in recession, its currency usually rises at times of market stress because of the country's current account surplus and its net creditor status.

The Swiss franc gained 0.4% to 0.93595 franc per dollar CHF= . The euro also rose 0.4% to $1.13175 EUR= .

The dollar had jumped on Tuesday as investors hoped global monetary policymakers would offer further stimulus to offset trade and travel disruptions. But lack of clarity on what Washington will do has kept many investors on guard.

U.S. President Donald Trump said on Tuesday he would ask Congress for a payroll tax cut and other "very major" stimulus moves, but the details remain unclear. is too early to say the market sentiment has turned positive. Yesterday's rebound in the dollar and in risk assets is a type of a rebound you often see in a downtrend," said Shinji Ishimaru, senior currency analyst at MUFG Bank.

"In addition to economic measures, the focus will be on how much the U.S. can contain the infections to keep the economy going. That is a very big unknown," he said.

Money markets are fully pricing in a further 10-basis-point cut by the European Central Bank when it meets on Thursday. =ECBWATCH

The BoE rate cut follows similar moves by U.S. and Canadian central banks and put more pressure on the ECB to act, although it has limited room with rates already negative.

"The pound sold off initially on the aggressive move but the statement shows that their (BoE) action is co-ordinated with the Treasury and the measures include a package for lending," Jane Foley, senior currency strategist at Rabobank, said.

"Altogether the statement suggests lots of co-ordination. This is reassuring and should help limit the impact on the economy and that could also help support the pound."

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