Yen and Swiss franc gain on virus fears; yuan falls

London

THE Japanese yen and the Swiss franc gained on Thursday as the rising death toll from a virus spreading in China sent investors scurrying to the shelter of perceived safe-haven currencies while China's yuan tumbled to a one-month low.

The Chinese yuan in the offshore market, widely considered as a barometer of risk sentiment towards Chinese assets as mainland and Hong Kong markets are shut, tumbled to a one-month low below the psychological seven yuan per US dollar level in early London trading, its lowest level since late December.

"A risk-off theme continues due to the rising infection and death tolls from the coronavirus in China, and that is also affecting the Chinese currency, which is trading at new lows for the year," said John Marley at FX risk management specialist Smart Currency Business.

Risk aversion also knocked the Aussie and the Kiwi dollars lower, while the Japanese yen and the Swiss franc strengthened.

As the new pneumonia-like disease spread quickly in China, the US dollar is emerging as an ultimate safe-haven destination, with its high interest rates relative to the rest of its developed market peers also boosting its appeal.

The US dollar is the best performing currency among G10 currencies this month, with the dollar index rising 1.6 per cent so far this month to hit a two-month high.

"The US dollar and the yen have been the safe havens of choice as the virus spreads, and we expect these safe havens will remain well supported in the next few weeks," said Colin Asher, a senior economist at Mizuho Bank in London.

The dollar index last stood at 98.04, flat on the day but not far from Wednesday's two-month high of 98.19.

The yen firmed 0.1 per cent to 108.90 yen per US dollar, edging close to the three-week high of 108.73 touched last week.

The Japanese currency has fallen 0.3 per cent against the US dollar so far this month, but risen against most others, adding 1.6 per cent versus the euro and 3.9 per cent on the Australian dollar.

Among the biggest losers this month is the Aussie dollar, which has lost 3.9 per cent so far this month, the second worst performing currency in the G10, behind a 4.3 per cent drop in the Norwegian crown, which has been hit by falls in oil prices. REUTERS