The Japanese yen skyrocketed last week, hitting a seven-week high against the U.S. dollar. The investors returned to their risk-off tactics again, while the pandemic fears amounted as the coronavirus is spreading worldwide. The currency was on track for its largest daily gain since May 2017, after the virus was confirmed in the U.S.
That’s not surprising, as the measures to contain the virus have wreaked havoc on supply chains, as well as the world’s financial and economic markets. So, investors think safe-haven currencies are the best possible choice in this situation.
Mark McCormick, global head of foreign exchange strategy at TD Securities, stated that 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. The yen is now back to appropriate levels. It surged forward to 107.77 versus the dollar, the last trading up 1.22%.
According to McCormick, except for the safe-haven status, there could be one additional factor supporting the yen. Japan’s public pension funds have been rebalancing assets, which could boost the currency also.
It’s pretty clear that the Japanese Government Pension Investment Fund is trading ahead of the announcements of their weights, – noted McCormick. Over the past five years, they’ve created an allocation that leans much more towards global equities, global fixed income, global credit. Those measures would see the dollar-yen rally as they’re pushing some of their flows outside of Japan.
Meanwhile, equity markets have collapsed. The investors abandoned riskier assets. As a result, the S&P 500 is on course for the worst performance in a week since the 2008 financial crisis.
What about the Euro and the U.S. dollar?
The Euro surged forward to a 3-1/2-week high of $1.105. It last traded roughly flat at $1.100. However, the U.S. dollar index dropped by 0.093% to 98.349. The dollar lowered against the pound by 0.79% to 1.278.
Furthermore, traders were selling currencies closely associated with a possible recession. Such tactics caused the Australian dollar to fall by 1.07% to $0.650, reaching its lowest point in 11 years.