Let’s check the situation in the exchange market. On Thursday, the Swiss franc and the Japanese yen gained. Meanwhile, China’s yuan tumbled to a one-month low. Investors were running to the shelter of safe-haven currencies, as the rising death toll from a virus spreading in China.
In the offshore market, Chinese yuan is widely considered as a barometer of risk sentiment. Hong Kong and Chinese assets as mainland markets are shut. It tumbled to a one-month low below the psychological 7 yuan per dollar level in early London trading. It is the lowest indicator since later December.
John Marley is an FX risk management specialist Smart Currency Business. He said that the risk of the theme is continuing because of the rising infection and death tolls from the coronavirus in China. Thus, it affects the Chinese currency, which is trading at new lows for the year.
The Kiwi dollars and the Aussie were knocked lower by the risk aversion. Nevertheless, the Japanese yen and the Swiss franc strengthened.
China Virus and Japanese Yen
The new pneumonia-like disease spreads quickly in China. Thus, the dollar is emerging as an ultimate safe-haven destination. It has high-interest rates relative to the rest of its peers in the developed market. They are also boosting their appeal.
In January, among G10 currencies, the dollar is the best performing currency. Moreover, the dollar index is rising 1.6% so far this month to hit a two-month high.
Colin Asher is a senior economist at Mizuho Bank in London. He said that the United States dollar and the yen had been the safe havens. Because the Coronavirus is spreading, they expect that those safe havens will most probably remain well supported for the next few weeks.
The dollar indicator last stood at 98.04. Thus, it was not far from Wednesday’s two-month high of 98.19.
The yen was close to a three-week high of 108.73 touched last week.
It is the leading news in the market.