FOREX-Yen and Swiss franc gain as COVID variant dents risk appetite

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FOREX-Yen and Swiss franc gain as COVID variant dents risk appetite


By Karen Brettell

NEW YORK, Nov 26 (Reuters)News of a coronavirus variant potentially resistant to current vaccines sent investors dashing for the safety of the Japanese yen and the Swiss franc on Friday, and traders also took profits after an extended rally in the U.S. dollar.

The gains in the yen and the franc came at the expense of the growth-sensitive Australian dollar and Norwegian crown, though thinner volumes after Thursday’s U.S. Thanksgiving holiday made market moves more volatile.

The United States will restrict travel from South Africa – where the new mutation was discovered – and neighboring countries beginning Monday, a senior Biden administration official said.

The World Health Organization (WHO) said it was designating the variant, named omicron, as being “of concern,” a label applied only to four variants to date. It could take weeks for scientists to fully understand the variant’s mutations and potential dangers.

“If we’re looking at something like this where we have new mutations on mutations of a spike protein it almost feels like the initial working assumption for most market participants is that this is a new phase of the pandemic,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

“New lockdowns and restrictions will maybe be put in place, and it certainly feels like we’re going to need a new vaccine as well,” he added.

One of the main gainers was the yen, which bounced off five-year lows hit this week against the greenback, and jumped almost 2% JPY=D3 to a high of 113.09, its best day since March 2020.

The euro rose 0.97% to a high of $1.1312 EUR=EBS, though it fell to more than six-year lows against the resurgent Swiss franc EURCHF=EBS, at 1.0428 francs per euro.

“This is a textbook flight to quality into yen and the Swiss franc on the new virus strain with the thin liquidity also a factor, which may accelerate the unwinding of short bond positions,” Kenneth Broux, a strategist at Societe Generale in London, said.

Speculative accounts had been massively short safe-haven assets, with U.S. CFTC figures showing net bearish positioning at $1.2 billion and $10.3 billion for the yen and Swiss franc, respectively, in the latest week.

The dollar index =USD dipped 0.75% to 96.030, after reaching a 16-month high of 96.938 on Wednesday. It has jumped from 93.872 on Nov. 9 as investors increased bets that the Federal Reserve will begin raising interest rates in mid-2022 to thwart stubbornly high inflation.

CIBC’s Rai said Friday’s decline in the greenback was more likely due to investors taking profits after the currency’s recent gains, and not a change in the dollar’s safe-haven status.

“The near-term move is mostly about extended positioning and closing those out. Once that becomes a little bit more finely balanced and if we are in a risk-off scenario, then I would expect the dollar to continue to outperform,” he said.

Sterling GBP=D3 briefly slipped to a new 2021 low below $1.3278 as the jitters prompted some to scale back bets on an interest rate hike in December.

In the crypto currency market bitcoin BTC=BTSP fell as low as $53,524, the lowest since Oct. 10, while ethereum ETH=BTSP dropped to $3,917, the lowest since Oct. 28.

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Currency bid prices at 3:22PM (2022 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Dollar index

=USD

96.0110

96.7760

-0.77%

6.701%

+96.7870

+95.9850

Euro/Dollar

EUR=EBS

$1.1316

$1.1206

+1.02%

-7.35%

+$1.1323

+$1.1206

Dollar/Yen

JPY=D3

112.8300

115.3700

-1.84%

+9.64%

+115.3150

+113.0900

Euro/Yen

EURJPY=

128.08

129.29

-0.94%

+0.91%

+129.3300

+127.8100

Dollar/Swiss

CHF=EBS

0.9218

0.9356

-1.37%

+4.31%

+0.9359

+0.9216

Sterling/Dollar

GBP=D3

$1.3330

$1.3318

+0.09%

-2.43%

+$1.3349

+$1.3278

Dollar/Canadian

CAD=D3

1.2777

1.2646

+1.08%

+0.38%

+1.2799

+1.2650

Aussie/Dollar

AUD=D3

$0.7113

$0.7186

-0.95%

-7.48%

+$0.7190

+$0.7113

Euro/Swiss

EURCHF=

1.0433

1.0485

-0.50%

-3.46%

+1.0490

+1.0429

Euro/Sterling

EURGBP=

0.8484

0.8411

+0.87%

-5.07%

+0.8495

+0.8413

NZ Dollar/Dollar

NZD=D3

$0.6808

$0.6854

-0.63%

-5.17%

+$0.6856

+$0.6805

Dollar/Norway

NOK=D3

8.9800

8.9530

+1.17%

+5.49%

+9.1010

+8.9850

Euro/Norway

EURNOK=

10.2380

10.0493

+1.88%

-2.19%

+10.2941

+10.0486

Dollar/Sweden

SEK=

9.0852

9.0851

+1.23%

+10.91%

+9.1830

+9.0661

Euro/Sweden

EURSEK=

10.3107

10.1855

+1.23%

+2.33%

+10.3365

+10.1865

World FX rateshttps://tmsnrt.rs/2RBWI5E

(Additional reporting by Saikat Chatterjee and Sujata Rao in London; editing by Barbara Lewis and Leslie Adler)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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