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Big rise for the yen as “safe haven” status returns

 

The Japanese yen appeared to reclaim its position as the world’s default safe haven currency on Thursday and into Friday.

Despite the fact that the currency had previously dropped during the coronavirus market turmoil over fears that Japan was too exposed to China (the source of the outbreak), it surged over the course of the day.

It reached its best position in a month against the greenback.

This development happened partly because of fears that the virus could be about to explode into a pandemic.

The yen was up by 0.7% in this pair, and at one stage on Friday it was seen at 108.85.

The US dollar has lost over two percentage points in value in this pair overall this week, which represents its largest fall in this pair in well over three years.

The Antipodean currencies, which often suffer when China suffers due to the dynamics of trade in the Asia-Pacific region, were also down.

In its pair against the US dollar, for example, the New Zealand dollar saw a fall of an entire percentage point.

While in its pair with the Japanese yen, it was down by 1.7%.

The Aussie dollar managed to do slightly better than this, although not by much.

It was down by 0.7% against the greenback, and 1.4% against the yen.

It was spotted at $0.6519 at one point.

Some analysts are now even predicting that it could sink as low as $0.58 if the coronavirus problem is not contained.

These developments cemented the return of the yen as the world’s global default safe haven and may have spelled problems for those who had backed the US dollar to occupy this position for longer than it actually did.

According to analysts, news about the spread of the virus is coming in on a highly regular basis – which means it is difficult to predict exactly where the value of these currencies might go next.

The single European currency also mopped up some of the losses caused by the dollar’s fall in value.

One of the reasons that the US dollar dropped in value over the course of the day against the yen is that it has now been hit by fears that interest rate cuts are on the cards.

The perceived chances of this happening are now thought to be very high.

While seven days ago there was believed to be only a 9% chance of a rate cut by the Federal Reserve in March, it is now expected that there will be one then.

It’s believed that there will be three cuts overall by the middle of the year.

In terms of the coronavirus outbreak more generally, part of the problem for investors at the moment is that the problem appears to be rapidly worsening.

The arrival of the virus in places where it has no clear link to the Chinese source has caused panic, although panic in the currency trading world is not quite as bad as in the stock trading markets.

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