FOREX-Virus-driven risk-off move lifts yen versus dollar

Published 24/02/2020, 21:27
© Reuters.  FOREX-Virus-driven risk-off move lifts yen versus dollar
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By Kate Duguid

NEW YORK, Feb 24 (Reuters) - The Japanese yen rose versus

the U.S. dollar on Monday in a risk-off move spurred by the rise

in coronavirus cases.

The safe-haven yen JPY= was last up 0.73% at 110.74 per

dollar, having strengthened to 110.34 earlier in the day.

The dollar index =USD , which weighs the greenback against

a basket of six peers, can also function as a safe-haven trade.

But it was in negative territory for the day, likely because of

a significant move lower in U.S. equities. It was last down

0.095% at 99.33 per dollar.

With coronavirus cases rising in Italy and several Middle

Eastern countries dealing with their first infections, fears of

a global pandemic sent markets into a tailspin, even as China

eased curbs with no new cases reported in Beijing and other

cities. U.S. stocks fell sharply, with the Dow Jones Industrial

Average, the S&P 500 and the Nasdaq all off by nearly 3%. Wall

Street's fear gauge, the CBOE Volatility Index .VIX , jumped to

a six-month high. .N European equities markets suffered their

biggest slump since mid-2016, gold soared to a seven-year high

and oil tumbled nearly 5%. "Ultimately this is all a risk-off trade," said Marvin Loh,

senior global markets strategist at State Street Global Markets.

"When you look at the yen, when you look at the Swissie,

when you look at rates, it is risk-off. It's probably

reflective, to a certain degree, of the market being a little

too sanguine up until now ... so there's an adjustment process

around it."

Still, the yen traded well within last week's range, and

currency market moves were muted compared with those in U.S.

stocks and Treasuries. Some analysts said investors might be

discounting the yen's traditional safe-haven value because of

Japan's virus exposure. "In the scheme of things however, given risk-off conditions,

and heightened coronavirus concerns, USD-JPY has held up

relatively well," wrote analysts at Action Economics. "There was

talk last week of early portfolio flows into the dollar ahead of

Japan's fiscal year end on March 31, with pension funds rumored

to have been big buyers. These flows may continue, and despite

the current risk-averse conditions, may limit USD-JPY downside

for now."

U.S. economic data last week came in below expectations.

Money markets are now pricing in a Federal Reserve interest rate

cut of 25 basis points in June.

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