* Fourth person dies from pneumonia in city of Wuhan
* Yuan down 0.6% vs dollar in offshore trade
* Safe havens yen, Swiss franc gain
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh (Adds Trump comments, adds quote, chart)
By Dhara Ranasinghe
LONDON, Jan 21 (Reuters) - China’s yuan tumbled on Tuesday, pulling away from six-month highs against the dollar, while the safe-haven yen rallied as the spread of a pneumonia-like virus in China sparked a sudden bout of risk aversion and rattled world markets.
China reported a fourth death from a new coronavirus as the number of cases continued to rise, just as hundreds of millions of Chinese prepared to travel for the Lunar New Year holiday.
Global stocks fell as the outbreak rekindled memories of the severe acute respiratory syndrome (SARS) in 2002-2003, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.
“You’ve got a stronger yen, a stronger Swiss franc and risk aversion is setting in across everything,” said Kit Juckes, an analyst at Societe Generale. “It would be very surprising if it was a trend-changer in terms of where things go from here, but it is early days.”
The yuan fell almost 0.7% in offshore trading to 6.9126 per dollar, off Monday’s six-month highs. Onshore, the yuan fell to its lowest in over a week at 6.9094.
Currencies linked to Chinese trade and tourism also dropped. The Australian dollar touched its lowest in over a month at $0.68445. The New Zealand dollar fell as much as a third of a percent to $0.6589 before recovering some ground. The Korean won dropped 0.6%.
“The markets are attributing the selloff to concern about the SARS-like virus in China, but it’s difficult to know if it is that or by and a large a reversal of the recent price action,” said Lee Hardman, a currency analyst at MUFG.
In contrast, the yen gained 0.15% to 110.05 per dollar as investors moved into safe-haven assets like the yean and U.S. Treasuries. The Swiss franc rose to 0.96750 to the dollar.
The dollar index, which measures its value against a basket of six currencies, was down at 97.481 — near the highest level in a month.
Speaking at the World Economic Forum in Davos, U.S. President Donald Trump said negotiations with China over a phase-two trade deal will start soon. The phase-one deal signed last week boosted confidence in the world economic outlook, supporting the dollar.
The euro and sterling gained against the dollar .
Sterling benefited from news that Britain’s economy created jobs at its fastest rate in nearly a year in the three months to November, potentially undermining the case for a Bank of England interest rate cut next week.
The pound was last up 0.3% at $1.3053. The euro held a narrow range around $1.1105 before Thursday’s European Central Bank meeting.
The mood among German investors brightened far more than expected in January on hopes Germany’s economy might not be hurt as much by trade tensions as previously thought, a survey from Germany’s ZEW research institute showed.
Earlier on Tuesday, the Bank of Japan kept its short-term interest rate target at minus 0.1% and its pledge to guide 10-year government bond yields around zero.
Reporting by Dhara Ranasinghe; additional reporting by Stanley White in Tokyo; editing by Larry King