Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Yen, franc surge as new virus variant rattles markets

11/26/2021 | 08:21am EST

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

LONDON, Nov 26 (Reuters) - News of a new coronavirus variant potentially resistant to current vaccines sent investors dashing for the safety of the Japanese yen and the Swiss franc on Friday, while the possible unwinding of U.S. rate hike bets weighed on the dollar.

The yen and franc gains came at the expense of the growth-sensitive Australian dollar and Norwegian crown though thinner volumes after Thursday's U.S. Thanksgiving holiday made market moves more volatile.

Little is known of the new COVID-19 variant, detected in South Africa, Botswana and Hong Kong. But scientists reckon it has an unusual combination of mutations that may make it able to evade immune responses and be more transmissible.

The news sent the South African rand down more than 2% against the dollar to the lowest since last November though it later pared those losses.

One of the main gainers was the yen which bounced off five-year lows hit this week against the greenback, and jumped more than 1% to a high of 113.6. The currency was on track for its best day since March 2020.

The euro, meanwhile rose 0.7% to a high of $1.129 though it fell to near 6-1/2 year lows against the resurgent Swiss franc at 1.044 francs per euro.

"This is a textbook flight to quality into yen and the Swiss franc on the new virus strain with the thin liquidity also a factor which may accelerate the unwinding of short bond positions," said Kenneth Broux, a strategist at Societe Generale in London.

Speculative accounts had been massively short safe-haven assets, with U.S. CFTC figures showing net bearish positioning at $1.2 billion and $10.3 billion for the yen and Swiss franc respectively in the latest week. Gold, which rose 1% on Friday, had a short position of over $2 billion, the data showed.

"It's not surprising to see the yen being the biggest gainer. First, it's the quintessential safe-haven and second it was very oversold," said ING Bank currency strategist Francesco Pesole. "Short yen positions are now being unwound."

He added the euro, as another low-yielding currency, was less exposed than cyclical peers such as the Australian dollar, while positioning data showed the single currency too had been oversold.

Britain cancelled flights to several countries, noting the new variant was considered by scientists to be the most significant one yet found.

Sterling slipped to a new 2021 low below $1.33 as the jitters prompted some to scale back bets on an interest rate hike in December.

Oil's price slide took the Norwegian crown down 1.2% at one point to the lowest since last August. Against the euro it fell more than 1%.

Gains for the yen, franc and euro pushed the dollar index , which measures the greenback against those and three other currencies - further away from Wednesday's 96.938, its highest in nearly 17 months. It last traded at 96.28, down 0.5%.

"One potential threat is that hawkish central banks think this variant threatens (policy) tightening plans. From that perspective the dollar may be a bit more vulnerable than the euro as we are already talking of Fed rate hikes next year," Pesole added.

Markets had priced in one rate hike from the European Central Bank at the end of 2022 but expectations had built for three possible increases from the Federal Reserve next year.

Broux of Societe Generale noted that the spread between the U.S. and German five-year yields had snapped in 10 basis points as Treasury yields fell heavily, allowing the euro to gain against the greenback.

(Reporting by Saikat Chatterjee and Sujata Rao; Editing by Mark Potter and Toby Chopra)


ę Reuters 2021
Latest news "Economy & Forex"
01:08aAnalysis-Investors look to prune portfolio risk as Fed hawkishness rules markets
RE
01:06aU.S. yields rise, Asian shares and European futures tumble as Powell warns on inflation
RE
01:05aAS OMICRON EBBS, ENGLAND REVIVES PLAN A : living with COVID
RE
01:02aEU : refers China to WTO following trade restrictions on Lithuania
RE
01:00aFed tightening a sign to get the 'heck out' of U.S. stocks
RE
01:00aIN CASE YOU MISSED ITľSchedule of Reuters features from this week
RE
12:58aGSK : Berenberg raises target price to 1700p from 1630p…
RE
12:56aIndian bond yields spike, rupee falls as hawkish Fed sparks outflow concerns
RE
12:54aU.S. urges de-escalation over Ukraine, offers Russia diplomatic path
RE
12:51aIndia probes illegal immigration after tragedy near Canada border
RE
Latest news "Economy & Forex"