Covid fears boost safe-haven currencies
With Covid-19 variant fears washing across financial markets today, haven currencies have outperformed at the expense of emerging and commodity/risk sentiment currencies. Trading was muted overnight due to a US holiday with the dollar index easing slightly by 0.08% to 96.71, driven mostly by gains in the yen.
EUR/USD and GBP/USD are holding steady at 1.1220 and 1.3300 this morning. Their technical picture remains bearish and neither of them is likely to receive any haven inflows. With Europe already capped by its 4th virus wave situation, both will remain sells on any sort of rally.
Elsewhere, USD/JPY has fallen by 0.55% to 114.70 as Japanese investors repatriate into yen in a defensive move. USD/JPY could fall to 114.00 in the next 24 hours. Likewise, the Swiss Franc is outperforming, USD/CHF falling 0.30% to 93.35. The Canadian, Australian and New Zealand dollars, bellwethers of commodity and risk sentiment, have unsurprisingly suffered today. USD/CAD has risen 0.53% to 1.2713, AUD/USD has fallen 0.65% to 0.7140 and NZD/USD is 0.60% lower at 0.6820. Both AUD and NZD are approaching their 2020 lows and a weekly close below 0.7100 or 0.6800 respectively, would be another bearish technical signal.
USD/ZAR and USD/MXN have risen by 1.0% today and Asian regional currencies are under some selling pressure as well. USD/IDR and USD/THB have risen by 0.40% with USD/KRW and USD/MYR rising by 0.30%. With a high beta to the global recovery, Asian FX will remain under pressure into the weekend thanks to the virus nerves sweeping markets, as with EM in general. USD/CNY is stubbornly clinging to 6.3900 today, providing some shield to regional currencies. China is unlikely to use today’s developments to weaken the yuan sharply, but it is another reason to reel back the one-way bullish bets on the yuan of the past few months.