Dollar gains after reports of coronavirus treatment are revealed

Denise Jackson

The US dollar managed to sustain its position in the foreign exchange markets on Wednesday after it was revealed that there may be a treatment on the cards for the deadly coronavirus.

The virus, which has now taken almost 500 lives, continues to rage – especially in the Chinese city of Wuhan, where the outbreak was first discovered.

However, two major events in the medical research world sought to address the problems associated with the virus.

One piece of research from the UK suggested that a vaccine might be possible, something which was described by news agency Reuters as a “significant breakthrough”.

In China, a report from a university indicated that there may be medicine which could mitigate the effects of the condition.

The consequence for the foreign exchange markets has been that safe haven currencies, which had previously surged on reports that the coronavirus was spreading, have declined in value over the course of the week.

The US dollar was up by a fifth of a percentage point on Wednesday in its pair against the Japanese yen.

This came after it reached a significant high point of 109.84 yen – and while it later dropped, this performance was perceived by analysts to be a strong one.

The yen is usually perceived to be a safe haven currency due to Japan’s position as a global creditor.

The trend of the US dollar resurgence against safe havens was apparent elsewhere too.

The dollar was up against the Swiss franc, which is also usually perceived as a safe haven.

The rise in this pair was much higher at two fifths of a percentage point – and the dollar was tradable at 0.9727 franc at one stage.

Overall, the dollar index – an artificial tool used by traders to understand the performance of the US dollar in comparison to other major currencies around the world – was up.

It was spotted up by 0.3% at one stage, leaving it in a position of 98.264.

This happened for a number of reasons, however, and did not solely relate to international developments.

It was also up because of some positive economic data releases within the US.

The Institute for Supply Management revealed its non-manufacturing activity index, for example, which was shown to be at its best position since August of last year.

It was noted at 55.5.

And when it came to payrolls, private sector job figures were shown to have gone up by 291,000 over the course of the month just ended.

This figure was revealed in the National Employment Report from ADP and reflected a much better performance than had been predicted.

Elsewhere around the world, the Australian dollar rode high on the wave of pro-China sentiment and secured a rise of a fifth of a percentage point in its pair with the US dollar.

However, Wednesday was a difficult day for the single European currency.

It was down by almost half a percentage point in its pair with the US dollar and was spotted at $1.1003 at one stage.

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Denise Jackson
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