Investing.com - The Japanese yen is in demand Monday as traders flock to the safe haven currency amid concerns over the spread of the pneumonia-like virus in China.
At 03:20 ET (0820 GMT), the USD/JPY dropped 0.2% to 109.08, having fallen as low at 108.73 overnight, the lowest level since Jan. 8. The US Dollar Index Futures, which tracks the greenback against a basket of other currencies, was largely flat at 97.68.
Nearly 2,000 people in China had been infected and 56 killed by the disease, Chinese authorities said Sunday, although reports state that the death toll has since increased to 80.
"According to recent clinical information, the virus's ability to spread seems to be getting somewhat stronger," China's National Health Commission Minister Ma Xiaowei said at a press briefing Sunday, adding that it is infectious in its incubation period, i.e. before symptoms show, making it harder to contain.
That said, analysts at ING don’t see the USD/JPY losses becoming extreme, ““with Chinese markets being closed until Friday for the Lunar New Year perhaps limiting the fall-out on asset prices.”
Looking ahead, “we doubt the Fed will have too much impact on USD/JPY this week,” the analysts said, adding that Japanese data this week includes updates on Tokyo CPI, Employment, Industrial Production and Retail Sales.
“At its recent meeting, the Bank of Japan modestly upgraded growth and downgraded its inflation forecasts to leave its complicated monetary policy unchanged. It is hard to see BoJ policy having much impact on the JPY this year,” ING added.
Sterling, the euro, and the dollar were subdued as traders ahead of not only the Federal Reserve rate-setting meeting on Wednesday but also the Bank of England on Thursday.
At 03:25 AM ET (0825 GMT), EUR/USD traded 0.1% higher at 1.1031 and GBP/USD flat at 1.3075.