The U.S. dollar rallied on Monday against most major currencies due to U.S. President Trump accusing China of spreading the virus. Concerned investors bought the dollar. The safe-haven Japanese yen was the only currency that rose versus the greenback, last trading up by 0.2% at 106.71.
On the other hand, European currencies declined. The euro dropped by 0.4% at $1.0932, while the sterling slid by 0.4% to $1.2442.
The investors fear the negative consequences of global growth from another escalation in U.S.-China tensions. According to Simon Harvey, the currency analyst at broker Monex Europe, Monday’s session was being dominated by risk-averse trading.
Scandinavian currencies fell against the dollar as well as they are very vulnerable to global trade risks. The Norwegian crown dropped by 0.8% at 10.3975, and the Swedish crown shaved 0.6% at 9.8995 versus the dollar.
Chinese Yuan collapsed. What caused its decline?
The Chinese Yuan plummeted down to a six-week low of 7.1555 against the dollar in the offshore market during the last session. However, it was flat at 7.1380 on Monday. Traders fear that the previous year’s U.S.-China dispute will be rekindled over the coronavirus.
U.S. President Donald Trump blamed China for the pandemic, as many believe the new coronavirus originated from the central Chinese city of Wuhan. Secretary of State Mike Pompeo shares Trump’s assertion as well. He declared on Sunday that there was a significant amount of evidence about the coronavirus emerging from a Wuhan’s laboratory.
However, so far, Pompeo did not provide evidence. He also didn’t dispute a U.S. intelligence conclusion that the coronavirus was not human-made. Still, analysts are debating if the U.S. plans to attack China again with more trade tariffs or by canceling the payments on the U.S. Treasurys.
Lee Hardman, a forex strategist at MUFG, noted that a re-escalation in U.S.-China trade tensions has the potential to end to the stability in USD/CNY. Experts agree that in case of conflict, the dollar/yuan cross would see more volatility.