* Dollar touches two week high vs basket of currencies
* AUD slips on signs of fresh excitement in China
* Graphics: World exchange rates in 2020 tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, May 12 (Reuters) – The dollar continued to gain on Tuesday as growing fears of another wave of coronavirus infections that counteracted a global recovery and fresh signs of trade tensions made investors cautious.
U.S. Federal Reserve officials who downplayed the likelihood of negative interest rates boosted the dollar’s yield attraction, while concerns about new viral infections in China, Germany and South Korea fueled demand for safe haven, analysts said.
Governments’ preliminary steps to bring their countries out of lockdown were also a source of uncertainty due to the medical and economic risks.
“It’s a little bit of return support (for the dollar) and a general return on nerves,” said Westpac FX analyst Sean Callow as April’s wave of riskier currencies disappears.
“Our base case has been for a while now that risk taking was exaggerated, we just don’t think (improvement) will be a straight line.”
The Australian dollar slipped as far as 0.8% to a one-week low of $ 0.6432 after China banned some Australian meat imports but paired losses as Australia’s trade minister lagged behind the issue as a technicality.
Other majors waged losses, except the yen, which fired a fraction after a nearly 1% fall on Monday that had pushed it to the lower end of an interval it has been trading at for a month.
The euro dipped below $ 1.08 for the first time in almost a week, before recovering to $ 1,0802. The New Zealand dollar also parried early losses to a stable level of $ 0.6083.
The dollar slid approx. 0.3% to 107.36 yen.
A wonderful plan to lift lockdowns in the UK also kept the pound under pressure at $ 1,2337.
Against a basket of currencies, the greenback touched a two-week high in Asia before falling back to flat at a week high of 100.27.
Soft data from China, where factory prices and inflation missed expectations, and a worrying resumption of COVID-19 cases after easing restrictions on movement and businesses drew investors’ attention.
The central Chinese city of Wuhan, where coronavirus first emerged late last year, reported on its first cluster of coronavirus infections since a shutdown of the city was lifted a month ago.
BUY AND BARLEY
The dollar has closely tracked investors’ risk aversion through the coronavirus crisis. But rising interest rates with longer tenor as Washington prepares to lend approx. $ 3 trillion this quarter has also added some attractiveness to the currency.
Investors expect a speech Wednesday from the U.S. Federal Reserve Chairman Jerome Powell expects to exclude or tell the prospects of negative interest rates, which the futures market has begun to price in 2021.
U.S. President Donald Trump’s refusal to reopen “phase 1” talks with China after the state-run Global Times floated the idea on Monday raised the prospect of further trade tensions.
The Australian Commerce Minister said China’s ban on some of its meat exports was not due to Canberra pressuring an investigation into the origin of the coronavirus, although the move was a new reminder of trade vulnerabilities.
China is also planning hefty tariffs on Australian barley, grain producers said on Sunday, although the Australian government has tried to downplay the link between trade movements and diplomatic tensions with its largest trading partner.
“If it stays with beef and barley, then financially, it shouldn’t mean much to Australia,” said Stephen Innes, head of global market strategist at AxiCorp.
“The risk, of course, is that this is extended to more critical areas such as iron ore, coal, education, LNG, etc.” (Reporting by Tom Westbrook; Editing by Sam Holmes & Simon Cameron-Moore)