Fundamental Comment

Safe havens tighten their grip as corona fears exaggerate

Safe havens tighten their grip as corona fears exaggerate

Investors resorted to safe havens on Thursday, as fears of the corona epidemic intensified, with the rise in infected cases to 15,000 and deaths toll to 240 deaths, causing panic in financial markets.  

Classic safe haven assets such as the yen, franc and gold strengthened against major currencies, while Asian stocks failed to track the suit of their U.S. counterparts overnight.

While the U.S. dollar is sometimes treated as a safe haven, when worries deepen, investors mainly rush to classic refuges as they still offer the highest security level during times of panic.

The U.S. dollar fell 0.3 percent against the yen to trade at 109.75, noting that the pair recorded a high of 110.13 on Wednesday, the highest since January 21.

Against the Swiss franc, the dollar slipped 0.12 percent to 0.9770, while the dollar index, which tracks the green currency’s movements versus a basket of major currencies, dipped 0.12 percent to 98.80.

Gold climbed to a top of $1576.99 an ounce today, erasing nearly all the losses incurred over the previous three sessions.

Cryptocurrencies, recently deemed as refuge assets, continued to trade higher, where the Bitcoin hit $10,500, while the Ripple surged 12.78 percent to $0.3252, according to CoinMarketCap. 

Market participants are currently assessing the economic damage from the spread of the coronavirus as Barcelona canceled the annual Mobile World Congress conference that hosts 100,000 visitors.

Also, China closed a refinery and suffered from a plummet in auto sales due to the rise in deaths and infected cases.

In his second day of testimony, Fed Chain Jerome Powell said the central bank was carefully watching the latest developments of the coronavirus and pointed to readiness to use QE measures and forward guidance in the event of an economic downturn.

Later in the day, the EU Commission will release its newest economic forecasts for the euro bloc and the U.S. will publish the consumer price index for January.

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