The Australian dollar to fall by 1.07% to $0.650, reaching its lowest point in 11 years. The currency’s downfall was due to the traders selling currencies closely associated with a possible recession.
The U.S. dollar index has also dropped by 0.093% to 98.349. The dollar fell against the pound by 0.79% to 1.278. On the other hand, the Euro soared to a 3-1/2-week high of $1.105. It last traded at $1.100.
Japanese Yen also skyrocketed. What caused the currency’s rally?
The Japanese yen hit a seven-week high versus the U.S. dollar last week. The experts think that several reasons are causing the currency’s rally. The first one is its safe-haven status. As the coronavirus is spreading worldwide, traders returned to their risk-off tactics. As a result, the yen was on track for its largest daily gain since May 2017.
However, Mark McCormick, global head of foreign exchange strategy at TD Securities, noted that there were other circumstances, which also helped to boost the currency. Japan’s public pension funds have been rebalancing assets, which could cause the yen’s rally.
According to McCormick, it’s clear that the Japanese Government Pension Investment Fund is trading ahead of the announcements of their weights. They’ve created an allocation that leans much more towards global equities, global fixed income, global credit during the past five years. As they’re pushing some of their flows outside of Japan, such actions would see the dollar-yen rally in the current environment.
The yen is significantly more reliable from where it was even last week when people were saying that the yen wasn’t a safe-haven anymore – noted McCormick. The currency returned to appropriate levels, surging forward to 107.77 against the dollar. It traded up 1.22% at last.
While the safe-haven currencies rally, the equity markets have plummeted down as the traders abandoned riskier assets. The S&P 500 was on course for the worst performance in a week since the 2008 financial crisis at last.
Such a downfall isn’t surprising, because the measures to contain the virus have wreaked havoc on the world’s financial and economic markets, as well as supply chains.