Safe-haven currencies surge on virus concerns

Published On: February 1, 2020Categories: Trading1.8 min read

Yen and Swiss franc jumped on Friday amid rising concerns over the China virus outbreak

The safe-haven currencies, yen and Swiss franc, jumped on Friday as worries about the global economic impact of the latest coronavirus outbreak in China intensified.

The yen rose to a three-week high against the dollar, while the Swiss franc climbed to a two-week peak as the two safe-haven currencies reached multiweek highs.

The Australian dollar fell to a four-month low against the U.S. dollar, while China’s offshore yuan struggled due to the impact of the virus.

The World Health Organization declared the coronavirus outbreak a global emergency on Thursday.

Many countries have issued travel advisories to their citizens and a number of airlines have curtail flights to and from China.

When we take a look at the overall picture heading into the week, there was some optimism that we could still see strong earnings. There’s anticipation that eventually we’re going to see a trickle-down effect of the Phase 1 trade deal with China, said Edward Moya, senior market strategist at OANDA in New York.

Right now, none of that matters. It’s all about the virus and its impact on the Chinese economy and its trading partners, he added.

U.S. data on consumer spending and personal income did push the dollar a little higher against the yen and euro earlier, as core consumer prices as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month after advancing just 0.1% the previous four months.

But the U.S. data’s impact was short-lived.

Investors remained transfixed on the casualties from the virus and feared its impact on the global economy, including businesses such as airlines and hotels.

China’s offshore yuan gave up earlier gains and was last down against the dollar. The U.S. currency added 0.1% to 6.9884, although that was some way off the 7.0038 level the yuan dropped to on Thursday.

The dollar fell 0.5% against the yen to 108.35 yen in afternoon trading, after earlier dropping to a three-week low of 108.33 yen. The greenback also slid to a two-week trough versus the Swiss franc and was last at 0.9637 franc.

The Australian and New Zealand dollars, both sensitive to sentiment in China, fell to new multimonth lows.

The New Zealand dollar dropped 0.5% to US$0.6463, after earlier touching a two-month low. The Australian dollar lost 0.4% to US$0.6695, hitting a four-month low earlier.

About the Author: Jonathan Adams

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