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

Published 11/02/2020, 01:47
Updated 11/02/2020, 01:54
© Reuters.  FOREX-Dollar and yen supported as coronavirus fears weigh on mood

© 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". Coronavirus 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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