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FOREX-Dollar and yen supported as coronavirus fears weigh on mood

Published 11/02/2020, 11:47 am
Updated 11/02/2020, 11:49 am
© Reuters.  FOREX-Dollar and yen supported as coronavirus fears weigh on mood

* Dollar, yen hold firm as safe havens

* For an Eikon page tracking the coronavirus, click here https://amers1.apps.cp.extranet.thomsonreuters.biz/cms/?navid=747389195

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook

SINGAPORE, Feb 11 (Reuters) - The U.S. dollar and Japanese yen were in demand on Tuesday, along with the bonds of both countries, as worries about the spread of coronavirus had investors heading for safe harbours.

The World Health Organization said overnight that the spread of cases among people who have not been to China could be "the spark that becomes a bigger fire". has killed 1,016 people in mainland China, Chinese health officials said on Monday, though they also reported a drop in the number of daily new cases. here https://amers1.apps.cp.extranet.thomsonreuters.biz/cms/?navid=747389195 for an Eikon page tracking coronavirus cases.

The dollar, seen as a safe haven owing to its position as the world's reserve currency, stood by a four month high against the euro at $1.0910 EUR= . Against a euro-heavy basket of currencies it also stood at a four month high of 98.832 .DXY .

The greenback touched a three-month high of $0.6378 per New Zealand dollar NZD=D3 , and at $0.6686 per Aussie dollar was not far above the decade peak of $0.6657 hit on Monday AUD=D3 .

"It's been helped out by a lot of things," said Westpac FX analyst Imre Speizer.

"The coronavirus hitting has money going into the U.S. dollar," he said. "You've seen a good run of economic data in the U.S., that's been another support ... the vulnerable ones are the commodity countries like Australia and New Zealand."

China's central bank has moved to support the economy by cutting interest rates and flushing the market with liquidity. But with the extent of spread and its impact still unknown, investors have dumped currencies exposed to China for dollars and yen.

That left the yen fairly stable against the dollar - it last sat at 109.75 yen per dollar JPY= - but gaining steadily on other Asian currencies. Trading was subdued with Japanese markets closed for a holiday.

The Australian and New Zealand dollars have dropped more than 4% on the yen this year AUDJPY=D3 NZDJPY=D3 . The Singapore dollar has lost 3% in as many weeks SGDJPY=R .

U.S. Treasury and Japanese government bond prices have steadily climbed this year. US/ JP/

"The risk of a larger downgrade in Chinese GDP growth over Q1 20 and 2020 as a whole is gaining momentum," said Richard Grace, chief currency strategist at Commonwealth Bank.

"With China's economy accounting for some 17% of world GDP, but accounting for a significant contribution to growth in the global economy, the risk of a larger downgrade to global growth is clear," he said.

"Upside in AUD/USD is limited, and downside risks continue to mount."

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