Fears mounted on Monday that the outbreak that began in China will grow into a pandemic with disruptive and deadly consequences for countries around the world, after sharp rises in infections in South Korea, Italy and Iran.

Such investor concerns kept the greenback well bid and pressured the yuan and other regional currencies, traders said, with corporate demand for dollars also rising after more companies returned to work this week.

The Lunar New Year holiday, which should have been wrapped up in late January, has been extended to contain the virus spread. Companies are slowly resuming production with employees gradually returning to work.

Terence Wu, strategist at OCBC Bank, said market focus will be on the global spread of the virus and its downside risk to economic growth, expecting "risk-off sentiment to persist, at least in the early week".

The onshore Chinese yuan opened at 7.0430 per dollar and was changing hands at 7.0318 at midday, 53 pips weaker than the previous late session close.

Prior to market open, the People's Bank of China (PBOC) set the midpoint rate at 7.0246 per dollar, 36 pips or 0.05% weaker than the previous fix of 7.021, and the softest level since Dec. 12, 2019.

Chinese authorities are battling to control the fast-spreading virus that has killed more than 2,400 people, mostly in central Hubei province, but are also encouraging businesses to restart in less-affected areas as prolonged production shutdowns will likely have a huge impact on economic growth.

"The outbreak of novel coronavirus pneumonia will inevitably have a relatively big impact on the economy and society," President Xi Jinping said on Sunday.

Low-risk provinces should focus on restoring work and production in an all-round way, provinces with medium-level risks should aim for an orderly work resumption, while high-risk regions should focus on epidemic controls, Xi said.

Trading in the currency market has become more active, traders said, though volume has not returned to normal levels.

Several senior central bank officials also pledged that the PBOC will take further steps to support the virus-hit economy, including releasing more liquidity and lowering funding costs for companies.

The central bank has already delivered an interest rate cut last week, after having already injected over $200 billion in liquidity.

Monetary easing and higher liquidity injections should boost the economy in the long run, though it will pose a drag on the yuan in the short term.

Separately, a trader at a Chinese bank said developments in the virus outbreak will continue to affect the yuan's movement, but influence from the strong dollar cannot be ignored.

The global dollar index <=USD> rose to 99.543 at midday from the previous close of 99.262.

The offshore yuan was trading at 7.0403 per dollar as of midday.

(Reporting by Winni Zhou and Brenda Goh; Editing by Jacqueline Wong)