Coronavirus Continues to Weigh on Risk Currencies

Xe Corporate APAC

February 23, 20202 min read

The AUDUSD opens lower at 0.6598 and the NZDUSD opens lower at 0.6322 this morning.

The fast-spreading coronavirus was again the dominant factor behind market movements over the weekend.

The latest signs of infections outside the Hubei province epicentre in China has triggered a selloff across financial markets, driving demand for safe-haven assets of gold, USD, and US bonds, while hurting so-called ‘risk/growth assets’ such as the AUD and NZD, global equities, and oil prices.

Gold prices hit a 7-year high, the yield of the 30-year US Treasury bond slide to an all-time low, and USD was resilient despite disappointing economic data.

The coronavirus has spread to 26 countries and territories outside mainland China and is believed to be more contagious than previously thought. Other countries may not be able to replicate Beijing’s draconian containment measures which is unnerving the markets. The World Bank estimates such outbreaks, and their containment measures, will cost an average 1% GDP, and is fearful the economic recovery may well be slower than initially thought.

Business activity in the euro zone picked up more than expected in February, which benefited the EUR.

The GBP also performed well after UK factories reported the fastest rise in out for 10 months.

NZ 4Q retail sales hit the tapes at 10:45am which will provide the domestic markets with some focus.

Global equity markets were lower on the day - Dow -0.8%, S&P 500 -1.1%, FTSE -0.4%, DAX -0.6%, CAC -0.5%, Nikkei -0.4%, Shanghai +0.3%.

Gold prices surged 1.6% to USD$1,643 an ounce. WTI Crude Oil prices fell 0.8% to US$53.44 per barrel.

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