FILE PHOTO: U.S. Dollar and Japan Yen notes are seen on this June 22, 2017 illustration picture. REUTERS/Thomas White/Illustration
February 21, 2020
By Marc Jones
LONDON (Reuters) – The yen regained its footing on Friday, as merchants swooped again into the Japanese foreign money after its worst four-day run in additional than two years.
The yen had misplaced 2% in opposition to the dollar within the earlier two days alone as worries concerning the affect of the coronavirus outbreak on Asia’s main economies unfold.
An early burst in London pushed it up as a lot as 0.5% to 111.48 yen, although it had edged again barely to 111.90 by the point the primary New York trades trickled in. <JPY=>
“Traditionally, the support for the yen comes from two sources, general risk-off sentiment and a move to safe-haven bonds,” mentioned Saxo Financial institution’s head of FX technique John Hardy.
The week’s dramatic slide, although, has raised extra basic questions concerning the yen’s status as a secure harbour when FX markets get stormy.
“The question is whether recent dollar/yen spike higher could be a one-off move triggered by order flows and algorithm trading or whether it is something else. This is a very interesting test of whether we are seeing regime change.”
Manufacturing exercise in Japan suffered its steepest contraction in seven years this month, highlighting the widening world fallout from the virus outbreak in China.
On the opposite facet of this week’s strikes has been an enormous cost from the dollar, which has had its strongest begin to a 12 months since 2015.
It was down 0.2% in opposition to the key currencies <=USD> by 1230 GMT however solely after the closely-tracked dollar index touched a three-year peak in a single day.
The euro has been shoved right down to a close to three-year low <EUR=>, Australia’s dollar <AUD=D3> traded at an 11-year low of $0.66 in a single day and China’s tightly-managed yuan <CNY=> was sitting at a two-month low of seven.0286 per dollar. [CNY/]
The tourism-exposed Thai baht <THB=> dropped 5.5% this week, the Hong Kong dollar slipped down its managed band whereas the Korean gained <KRW=> and Singapore dollar <SGD=> shed greater than 4%. Mexico’s peso has been ripped down 2.5% too after holding up comparatively properly for rising markets merchants lately. [EMRG/FRX]
“New (coronavirus) cases in (South) Korea and in Japan, (have) obviously given some people a little bit of cold feet regarding Japan and the yen as a safe haven,” mentioned David Bloom, world head of FX at HSBC.
Europe noticed a flurry of buying managing index (PMI)information. The euro noticed a modest rise to $1.0817 after IHS Markit’s Euro Zone Composite Flash PMI rose to 51.6 in February, beating all forecasters polled by Reuters.
The quickest rise in British manufacturing facility output for 10 months additionally helped sterling finish an in any other case robust week on a excessive as it climbed 0.4% in opposition to the dollar and 0.25% in opposition to the euro to $1.2930 and 83.5 pence per euro respectively.
“The euro zone economy managed to pick up some momentum again in February despite many companies having been disrupted in various ways by the coronavirus,” mentioned Chris Williamson, chief enterprise economist at IHS Markit.
(Further reporting by Tom Westbrook in Singapore; Modifying by Kirsten Donovan)