The Japanese Yen plummeted down against the U.S. dollar on Thursday. The greenback traded at 107.18 yen, surging forward from the 1-1/2-month low of 106.075 touched on Tuesday.
The dollar rallied on Thursday, its index soaring by 0.1% to 97.27 against a basket of currencies. The International Monetary Fund stated that it sees a deeper and wider pandemic damage than first thought, causing more concerns for traders.
Investors moved on risk-off currencies as a new increase in virus cases in the United States, along with fresh trade tensions, undermined hopes for a fast global recovery.
New daily coronavirus cases surged to nearly 36,000 in the United States. The virus has shown signs of rising in the southern and western parts of the country. The governors of New York, Connecticut, and New Jersey issued that travelers from nine other U.S. states have to quarantine for 14 days on arrival.
The FX market is getting concerned that this is not just a temporary spike – noted Bart Wakabayashi, Tokyo Branch Manager of State Street Bank and Trust. If things get worse, further economic shutdowns will have severe repercussions, as the United States is the world’s largest economy.
What about other currencies?
Commodity currencies declined during the last session. The Australian dollar tumbled down slightly to $0.6859 after falling by 0.90% during the previous day. The Canadian dollar also dropped down to C$1.3642 to the dollar.
Meanwhile, the Euro plummeted down to $1.1246, while The British pound lowered to $1.2411.
Some investors think that the economic impact of second-wave infections will be smaller than the first one. However, others are concerned that policymakers might fail to respond forcefully, thus risking further financial damage.
The risk-averse mood is supporting the greenback – stated Shinichiro Kadota, the senior currency strategist at Barclays. He added that FX markets initially priced in all the positive news about economic recovery. But they have now seen the news about the second wave, so things may change.