Coronavirus continues to grip forex markets

Denise Jackson

The coronavirus pandemic continued to have a profound effect on the state of the global foreign exchange markets on Wednesday and into Thursday.

Despite experiencing some problems earlier in the week, the US dollar – which is the world’s reserve currency – managed to edge forward in Wednesday’s trading.

This occurred due to a drop in the US equities markets earlier in the week, and also against a backdrop of suggestions that the coronavirus pandemic is nowhere near over.

Earlier in the week, there had been suggestions that the pandemic – which has caused many deaths and  decimated economies around the world – could be approaching the end of its course.

Analysts now appear to be taking the perspective that there is still no certainty when it comes to the medium term timeline.

On Wednesday, the dollar index was at one stage noted as being a tiny bit above its previous position, at 99.993.

The dollar index is a tool designed to allow traders to easily cross-compare the greenback’s performance compared to a “basket” of other major currencies from around the world.

The dollar was also higher in its pair against the Japanese yen – although again, not by much.

It was spotted at 108.79 yen at one stage.

Elsewhere around the world, the British pound was up significantly against the US dollar.

It rose in this pair by almost half a percentage point at one stage.

This came despite the peculiar backdrop to the pound’s fortunes.

The British Prime Minister, Boris Johnson, continues to remain in intensive care in a hospital in London after contracting the virus.

It was also revealed yesterday that Britain was reporting its highest number of deaths compared to any other point during the pandemic.

This figure was 938.

Elsewhere, the European Union was dealt a blow after its leaders were unable to agree on a package of additional support to help economies in the bloc.

Leaders were attempting to get a stimulus package in place which was designed to assist both citizens on the ground and also larger institutions like firms and national governments.

However, there is understood to be a difference in opinion between Italy, which has been at the epicentre of the European outbreak of coronavirus, and the Netherlands.

The two nations are reportedly finding it difficult to agree on a set of conditions to come alongside credit extended to Eurozone members.

As a result, the price of some Italian yields – especially those with shorter dates – went up.

In the currency markets, the single European currency dropped slightly in its pair against the greenback.

It was seen at $1.0883 at one point over the course of the day.

In Australia, meanwhile, traders were left reeling from the effects of the rating agency S&P’s decision to slash the country’s sovereign AAA rating.

It was taken from stable to negative.

Despite some early value drops for the Australian dollar, however, it later managed to recover from this and go up over the day.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

Denise Jackson
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