Euro and Yen Hit High; Safe-Haven Currencies in Demand

Investors are moving to safe-haven currencies as the coronavirus is spreading worldwide. After the infection broke out in Europe, South Korea, and the U.S., the stock markets went into turmoil. The futures and equities collapsed around the globe.

The virus turned the markets upside down – noted Marc-André Fongern, head of FX research at Fongern Global Forex. He thinks that abysmally poor economic figures are likely to be the rule rather than the exception for the foreseeable future.

Meanwhile, the Japanese yen surged forward. It traded by 0.8% higher, rising to 108.51 versus the dollar. It seems, the yen regained its safe-haven status after the short downfall, which was caused by bad data about Japan’s economy.

Traders are selling the currencies, which are closely associated with a possible recession. They are concerned that all these outbreaks can cause a pandemic. So far, it’s not the case, but CDC cautious about that possibility.

While the Chinese yuan was more or less steady during the last days, the Australian dollar dropped by 0.5% to $0.6517, reaching its lowest level in 11 years.

What caused the Euro to rise?

Besides the risk-off wave, bulls began to reverse out of so-called “carry trades” to avoid losing money. In carry trades, investors usually borrow in low-yielding currencies to invest in higher-yielding ones. But they are pulling out of higher-yielding coins presently.

Investors’ tactic boosted the euro significantly. The currency hit the 3-1/2-week high of $1.1053.

Meanwhile, volatility in the euro-dollar exchange rate surged forward to its highest level in more than a year on Friday, rising by 6.6%.

The greenback has also strengthened for a short time, before declining again. After the new data showed last week that the U.S. economy performed much better than the other countries, traders began buying the U.S. assets. That boosted the dollar for a while.

However, several other currencies dropped against the dollar. The Canadian dollar dropped to a nine-month low of 1.3456 against it, while the Norwegian crown fell to a new 20-year low of 9.4820.