The dollar held near a two-month high against a basket of major currencies while the Australian dollar and the yuan were under pressure on Thursday as investors sought to protect assets that could be hit by the China virus epidemic.
The US Federal Reserve, while keeping interest rates on hold as expected on Wednesday, also cited the virus as a source of uncertainty about the economic outlook.
As new disease such as pneumonia spread quickly in China and many of its trading partners in Asia and Europe, the dollar is emerging as a last resort safe haven.
The dollar is the best performing currency among G10 currencies so far this month, with the dollar index (= USD) rising 1.6% in January to reach a two-month high.
In the second and third place were the Swiss franc and the Japanese
The yen traded at 109.06 yen per dollar, gaining 0.14% the day before. The Japanese currency was down 0.3% against the dollar so far this month.
The Swiss franc changed hands to 0.9729 franc per dollar.
“The general market is neither clear risk nor risk. But in the currency market, the Swiss dollar, yen and franc are clearly favored now,” said Minori Uchida, chief currency officer at MUFG Bank.
“While it is highly uncertain how long the disease will spread and how hard it will hit the economy, declines in the Chinese economy appear inevitable.”
China’s economic growth could fall to 5% or even lower due to the coronavirus outbreak, possibly pushing policymakers to introduce more stimulus measures, a government economist said in speeches published Wednesday.
That would strike a blow to other economies that rely heavily on Chinese demand.
The Australian dollar gained $ 0.6751 after reaching a 3-1 / 2-month low of $ 0.67355 in the previous session.
The euro stood at $ 1,1009 (EUR) after touching a two-month low of $ 1,0992 in US trading on Wednesday.
Elsewhere, pure trading traded unchanged at $ 1,3016 ahead of the Bank of England policy decision later in the day.
Although expectations for a rate cut have fallen sharply after some robust data last week, they still remain at almost 50%, suggesting that the rate decision is likely to move the pound, whichever BoE goes.
The European Parliament gave final approval to Britain’s divorce from the European Union on Wednesday, clearing the way for the country to abandon the blockade on Friday after nearly half a century and pose a major obstacle to European integration./investing.com/