Safe havens continue to surge following rise in virus cases

David Hobart

The safe haven currencies were on the up in the foreign exchange markets on Thursday, after traders found themselves worrying over the spread and impact of the coronavirus.

A rise in cases had been spotted earlier in the week, with the Chinese province of Hubei saying that its case levels had gone into double figures.

As a consequence, risky currencies were off the agenda – and less risky ones were back on.

The Japanese yen, for example, was up by 0.3% in its pair with the US dollar.

It reached 109.770 in this pair at one stage.

In its pair with the single European currency, the yen – which is considered to be the world’s premier safe haven currency – was up to its highest point in four months.

The euro was also down in other pairs as well.

It was seen at 1.0622 in its pair with the Swiss franc, for example, which was its lowest point in many years.

It was below its 2016 low point of 1.0623, for example, and overall it was in its worst position since 2015.

The Australian dollar was another key loser over the course of the day, most likely due to the connection between it and the Chinese economy.

This connection exists as a result of a deep trading relationship between the two.

The Aussie dollar was down by 0.22% in its pair with the US dollar and reached $0.6724 at one stage.

Over the sea in New Zealand, the dollar was down by a fifth of a percentage point in this pair to $0.6453.

In terms of China’s own currency, the offshore yuan – which is traded around the world as part of the free market currency system – was down by 0.14% against the greenback.

It was seen at 6.9830 at one stage.

The onshore version was spotted up by 0.13% in its pair with the US dollar.

It was seen at 6.9809.

Overall, the US dollar index – which is an artificial way of measuring the value of the dollar in various pairs against different worldwide currencies – was close to a four-month high point.

This had a number of reasons, with the spread of the coronavirus as one no doubt.

The next challenge for the dollar is likely to be the US price statistics for the month just finished.

Some analysts believe that the dollar may surge if there is a rise in price-related pressure, as it could also cause the new-found surge in risk appetite to drop.

The rest of Friday is likely to be a busy day in the forex markets.

Preliminary gross domestic product figures are due out of Germany at 7am GMT covering Q4 of 2019.

On a quarter on quarter basis, this is expected to show no change from 0.1%.

However, it is due to show a year on year drop from 1% to 0.2% – which may be interpreted by the markets as significant.

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David Hobart
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