Surge in demand for dollar after coronavirus news

Chris Lee

The US dollar continued to mop up in the foreign exchange markets as trading got underway on Monday.

This development came after it was confirmed that the coronavirus had spread to other parts of the world – and as worries that it may be a pandemic reached fever pitch.

A range of countries in different regions of the globe said that they had been affected by the coronavirus over the weekend, fuelling concerns about its impact.

South Korea was one such country, while in the Middle East, Iran reported a rise.

In Europe, Italy said that it had seen a spike too.

One of the problems now, according to the World Health Organisation, is that some of the cases do not appear to be connected to China, where the problem first began.

The US dollar was the winner in this situation.

The dollar index, which tracks the currency according to how it is performing in six other major pairs around the world, was up by a fifth of a percentage point.

It was seen at 99.622 at one point – which came very close to the three year or so record of 99.915 which it hit last week.

The single European currency reported a nosedive of 0.3% in its pair against the greenback.

The euro was seen at $1.0778 at one stage.

According to analysts, this was partly to do with worries about the Italian outbreak.

However, it was also related to the economic links between the European Union and China.

Elsewhere, the Australian dollar came in for an horrendous performance.

It was down by 0.6% in its pair against the US dollar and reached $0.6585 at one stage.

This represented its worst performance in over a decade and was ascribed primarily to the fact that the Australian currency is deeply connected to the Chinese economy.

Over the water in New Zealand, the dollar there went down by the same amount in its greenback pair.

Other currencies on which traders tend to keep a close eye were affected too.

The Canadian dollar was down, as was Sweden’s currency – the crown.

The greenback’s rise came despite the fact that domestic economic information released in recent days has been less than promising.

This has led to some even beginning to predict that the US Federal Reserve, which is the country’s central bank, could decide to slash interest rates when it next meets.

In China itself, which is where the coronavirus first began, the international version of the local currency – the yuan – was down.

The greenback surged by 0.1% in its pair against the offshore yuan, which is traded on the open market rather than just in China.

The yuan was seen at 7.0375 after this development.

The coronavirus outbreak has had an interesting effect on the safe haven status of the Japanese yen.

The currency is usually seen as one which traders flock to during times of turmoil, but this does not appear to the case this time – at least not in any significant amount.

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Chris Lee
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