The safe haven yen rebounded while the South African rand and risk-sensitive Australian dollar plummeted on Friday as investors ducked after the discovery of a new variant of coronavirus that could resist current vaccines.
The yen rose by up to 0.64% to 114.595 per dollar and the Swiss franc rose 0.33% to 0.9330 per dollar after South African scientists discovered the spread of variant B.1.1.529 in the country had.
The variant has a number of mutations that can help it bypass the body’s immune response and make it more transmissible. It has since been found in Botswana and Hong Kong.
The rand fell 1.62% to more than a year low at 16.24 per dollar, while the Australian and New Zealand dollars fell to three-month lows at $ 0.7135 and $ 0.6818, respectively.
“Covid worries are definitely playing a role in increasing demand for safe havens, including the yen, and with South Africa being the location of these new ones Variant, this is an obvious reason to avoid this the edge, “said Shinichiro Kadota, Senior FX Strategist at Barclays in Tokyo.
The UK has rushed to impose travel restrictions on South Africa and neighboring Botswana, Namibia, Introduce Zimbabwe, Lesotho and Eswatini.
Sterling slid to a new 11-month low of $ 1.3299. However, the euro rose 0.15% to $ 1.1222 and rebounded after hitting its low in nearly 17 months at $ 1.1186 earlier this week.
Germany is considering To follow the example of Austria and again impose a Covid-19 ban with the continent once again the epicenter of the pandemic. Exchange rate gains for the yen, Swiss franc and euro drove the dollar index – which measures the greenback against these and three other currencies – further away from the 96.938 on Wednesday, the highest level in almost 17 months.
It was last at 96.707 the index stayed up 0.72% for the week and was still heading for its fifth straight weekly increase.
Traders have increased their bets that an increasingly restrictive Federal Reserve will raise interest rates by the middle of next Year, while central banks in Europe, Japan and elsewhere hold more cautious stances.
“If the Covid situation worsens, the dollar-yen could continue to decline, but otherwise the monetary policy divergence will continue Yen definitely weighs in the medium term, “said Kadota, who predicts that the dollar-yen will rise to 116 and beyond by the middle of next year.
On the other hand, 114 should be a lower limit for the currency spar in the short term, “unless the world really changes for the worse,” he said.
Last week, Bank of Ja Pan governor Haruhiko Kuroda reiterated his commitment to massive monetary stimulus, adding that the central bank is ready to increase this further if necessary. Overnight, the minutes of the October European Central Bank meeting showed that despite the pressures of heated inflation, most policymakers are tending to persistently stimulate and be cautious about policy changes.
In contrast, money markets are praising a fed. a rate hike by July, with a good chance it could happen in June.
A potentially crucial signpost in the direction of US policy is expected next Friday with the release of monthly pay slips. “In the medium term, we still prefer the USD,” wrote Jane Foley, Senior FX Strategist at Rabobank, in a research note.
“However, the market is now USD long and EUR short and the money market is very aggressive for rate hikes With the Fed positioned for next year, there is scope for pullbacks in the currency pair, “with $ 1.15 as a potential target, and payrolls reporting a possible trigger, she said.