Reuters reported on Wednesday that more stimulus is likely to follow. Those broader expectations of economic support as well as recent measures prompted investors to partly reverse the flight to safety seen over the past two weeks.
Gold tumbled, the Japanese yen had its worst session against the dollar in nearly six months and the Dow Jones stock index posted its biggest daily gain since August in overnight trade.
However, the yen, seen as a haven by virtue of Japan's position as the world's largest creditor, halted its decline by morning, suggesting investors are still cautious.
It last traded just above a 1-1/2 week low at 109.43 per dollar. The trade-exposed Australian dollar, by contrast, bounced 0.7% on Tuesday from not far above a decade low to its highest in a week. It last stood at $0.6733.
"Investors want to see some actual stabilisation in cases and an improvements in recovered people before rallying again," J.P. Morgan analysts wrote in note.
"As long as we don't see this in numbers, it feels like the rally should be faded."
In offshore trade, the Chinese yuan held overnight gains and stayed on the strong side of 7-per-dollar at 6.9943. The New Zealand dollar steadied at $0.6486.
One of the reasons the virus has caused so much alarm is that much remains unknown about it, including the mortality rate and transmission routes. What is becoming increasingly clear, though, is the severity of its economic impact.
As people stay home, factories lie idle and shops shut throughout China, economists have lowered their growth outlook, with Louis Kuijs at Oxford Economics, for example, forecasting 5.4% growth in 2020, compared with 6% previously.
As that ripples through the world economy, companies are already feeling the effects and forecasters are estimating a hit of between 0.2% and 0.3% to global growth.
Hong Kong's Cathay Pacific Airways Ltd said on Tuesday it will cut around 30% of its capacity over the next two months. Hyundai Motor will suspend production in South Korea because of disruption to the supply of parts.
"The economic shocks to mainland China brought by the coronavirus are likely to be 2 to 3 times larger than the SARS debacle in 2003," said DBS economist Chris Leung, referring to a previous epidemic that cut roughly a percentage point from GDP.
"The deepening of physical interconnectivity both within and outside China ever since has increased substantially."
Elsewhere, sterling rebounded from six-week lows overnight after better-than-expected construction activity data, while the euro was steady against the dollar at $1.1042.
($1 = 6.9979 Chinese yuan)
(Reporting by Tom Westbrook; Editing by Sam Holmes) ((firstname.lastname@example.org; +65 6318 4876;))