Virus spread beyond China spurs new round of dollar buying - REÙTERS

FEBRUARY 26, 2020

SINGAPORE (Reuters) - Asian currencies slid on Monday as the rapid spread of the coronavirus beyond China drove fears of a pandemic and sent investors flocking to gold and the dollar for safety.

FILE PHOTO: U.S. dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto, Ontario, Canada June 13, 2018. REUTERS/Chris Helgren

Italy, South Korea and Iran all posted sharp rises in infections over the weekend. South Korea now has more than 600 cases, Italy more than 150 and Iran 43 cases.

The World Health Organization said it was worried about the growing number of cases without any clear link to China, where the virus’ outbreak is believed to have begun.

The Australian dollar AUD=D3, sensitive to developments in the outbreak because Australia is a major exporter of commodities, fell through $0.66 to touch a fresh 11-year low in early trade.

The New Zealand dollar NZD=D3 followed it down. The Singapore dollar, Thai baht and Korean won - all sensitive to China's economic fortunes - were sold for greenbacks. [EMRG/FRX]

The risk aversion, which also saw U.S. stock futures tumble and gold and bonds rise, unusually extended to the Japanese yen. [MKTS/GLOB]

After partially recovering last week’s tumble on Friday, it traded flat at 111.55 per dollar as Asian investors discount its safety value owing to Japan’s virus exposure.

“The market reaction to the coronavirus appears to be evolving, beginning to differentiate the currencies vulnerable to the virus from the rest,” Barclays analysts said.

“U.S. dollar assets provide relative attractiveness,” they wrote. “In fact, our economists forecast no impact on U.S. growth from Covid-19, with relatively few domestic incidents and a low dependency on China’s economy.”

Against a basket of currencies =USD, the dollar headed back toward an almost three-year peak touched last week, before soft economic data knocked it from its perch on Friday.

It was a touch firmer on the euro at $1.0837 EUR= and pound at $1.2948 GBP=.

The coronavirus has killed more than 2,400 people in China, which also accounts for 98% of global diagnoses. However, the weekend’s spread outside of China appears to have caught authorities on the hop.

Italy has halted the carnival of Venice, shut schools, and sealed off affected towns across its wealthy north, but is struggling to find out how and where the virus’ spread began.

Seoul has put South Korea on high alert.

Cases in China continue to climb - with every fresh rise only adding to the growing human cost of the virus and to its economic disruption as China’s economy idles.

“From here on, a lot will depend on how fast China can resume production and contain negative implications for supply chains and global economic growth,” said Stephen Innes, Asia Pacific Market Strategist at AxiCorp.

The Chinese yuan CNH= was 0.3% weaker at 7.0555 per dollar in offshore trade. [CNY/]

Reporting by Tom Westbrook; Editing by Sam Holmes


This website uses cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you've provided to them or that they've collected from your use of their services
Real Time Analytics