* Dollar recovers after overnight drop
* Gains most against AUD, NZD
* S&P cuts outlook on Australia's AAA rating
* Yen firm as risk aversion returns
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, April 8 (Reuters) - The dollar found a footing on Wednesday as investors returned to safe-havens, unwinding some risk currency gains made on hopes the coronavirus crisis in Europe and New York was slowing.
The greenback rose on most majors besides the safe-haven Japanese yen, a day after suffering its worst drop against a basket of currencies USD= in nearly two weeks.
Safe-haven gains were slight but gathered pace in morning trade as the two-day rally in Asia's equity markets lost steam and bonds and gold firmed. MKTS/GLOB
The U.S. currency rose most against the risk-sensitive Australian and New Zealand dollars, gaining about 0.5% on each to sit at $0.6142 per Aussie AUD=D3 and $0.5951 per kiwi NZD=D3 . AUD/
"Risk aversion and the U.S. dollar are going hand in hand," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
"Improvement has been based on less-bad statistics coming out of various parts of the world...but our view is that markets are going to remain choppy - we can't expect an uninterrupted flow of singularly good or singularly bad news."
The dollar edged 0.1% lower to 108.55 yen JPY= . It rose a fraction against the British pound GBP= to $1.2321 and euro EUR= to $1.0878.
The Aussie was also knocked by ratings agency S&P downgrading the outlook on the sovereign AAA rating from stable to negative. York overnight reported 731 fatalities from COVID-19, the respiratory disease caused by the virus, the sharpest single-day spike, but state Governor Andrew Cuomo drew hope from an apparent levelling off in the number of hospitalisations. the Atlantic, British Prime Minister Boris Johnson, who has the illness, is in intensive care for a second night although his condition is stable. in Europe, Spain's daily toll of coronavirus deaths rose for the first time in five days, but officials there and across the continent pushed forward with plans to begin lifting some lockdown measures soon. Asia, the dollar rose 0.5% against the Korean won KRW= and lifted from a three-week low against the Chinese yuan - rising 0.1% to 7.0730 yuan in offshore trade CNH= . CNY/
Investors are keenly watching as lockdowns lift in Wuhan, China, the epicentre of the pandemic, for clues as to how the rest of the world may fare when the worst has passed.
Authorities are walking a fine line between allowing greater freedom of movement and preventing a second wave of infection, with particular concern people who show no symptoms but can still pass on the virus. on Wednesday, the U.S. Federal Reserve releases minutes from its emergency meeting last month, which may include more commentary on the depth of the economic contraction that looms.
"While the virus' curve is flattening, the economic effects of the corona crisis will linger for years," said Commonwealth Bank of Australia currency analyst Joe Capurso.
"Economies will take time to re-open, some businesses will not re-open, and unemployment will take years to (recover). We think that means the dollar and yen will re-strengthen."