Yen & Franc Gain As ‘New COVID Variant’ Dents Risk Appetite


  • News of a coronavirus variant potentially resistant to current vaccines sent investors dashing for the safety of the Japanese yen and the Swiss franc.
  • Traders also took profits after an extended rally in the U.S. dollar.

The Japanese yen and the Swiss franc surged on Friday, while the Australian dollar and the Norwegian crown slumped, as investors fled for shelter following the discovery of a new coronavirus variant that could resist current vaccines, reports CNBC.

New COVID strain takes market by surprise

Closed U.S. markets for Thanksgiving holidays meant market moves were more volatile in thin trading as traders rushed to dump long positions in the euro and the U. S. dollar.

Overnight headlines took markets by surprise with little known of the new COVID-19 variant, detected in South Africa, Botswana and Hong Kong. But scientists reckon it has an unusual combination of mutations and may be able to evade immune responses or make it more transmissible.

The yen jumped 1% versus the dollar while the euro fell to near 6-1/2 year lows against the Swiss franc at 1.044 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,” said Kenneth Broux, a strategist at Societe Generale in London.

Serious economic damage expected? 

Britain said the new variant was considered by scientists to be the most significant one yet found as it cancelled flights to a few countries.

  • Sterling slipped to a new 2021 low below $1.33.
  • Even the high flying Norwegian crown dropped, falling 1% versus the dollar and the euro respectively.

Gains for the yen, franc and euro pushed the dollar index =USD – which measures the greenback against those and three other currencies – further away from Wednesday’s 96.938, its highest in nearly 17 months. It last traded at 96.60, down 0.2%.

At this stage, it is too early to assess the potential economic consequences but any new wave could cause serious economic damage,” Holger Schmieding, chief economist at Berenberg, wrote in a note to clients.

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Source: CNBC


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