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Global currency markets are gradually coming down to earth amid escalating concerns over the second wave of the COVID-19 pandemic. The robust rally seems to come to an end. Now Forex is going through the global downward correction. Nevertheless, the US dollar, the Japanese yen, and the Swiss franc are more confident being traditional safe haven assets. Investors are seeking shelter for their savings buying those assets.
The Japanese currency has managed to assert strength to the highest levels in the latest two weeks. At the same time, riskier assets have come under pressure in the morning and are trading lower. The reason behind risk aversion is the rapid resurgence in the coronavirus rates in the US and around the world. With such rampant rates, a number of countries are thinking about re-imposing restrictive measures in an effort to stamp out the infection. A new lockdown threatens the fragile recovery in the global economy.
On Wednesday, a few American states reported a record surge in new cases. So, in a single day the US set a new record of about 60,000 confirmed cases. Such an alarming increase has never been recorded during the whole pandemic period.
Apart from the US, new cases were reported in Japan, China, and Europe. This arouses grave concerns and casts the shadow over the prospects of the global economy, thus market sentiment is turning sour.
The risk-off mood boosted demand for the Japanese yen, so that it climbed to the strongest level on the latest two weeks. The yen gained 0.25% versus the US dollar. USD/JPY is trading currently at near 106.93.
The US dollar index which measures the greenback's strength against a basket of major currencies also edged up 0.2%. Today the index is trading at about 96.919, having rebounded from a one-month low of 96.233.
The Swiss currency is also gaining popularity among investors. The franc is trading at highs against the single European currency. EUR/CHF is trading at near 1.0619. The franc is showing a similar dynamic against the US dollar. USD/CHF settled up at 0.9419, surpassing the latest high of 0.93625.
The single European currency is losing ground a bit. It edged down 0.1% to trade at 1.1273 versus the US dollar, lower than the recent high of 1.1371.
The US currency perked up following weekly updates on the US labor market. Yesterday, the US Labor Department reported that the number of initial unemployment claims declined to the greatest extent in the recent 4 months. No wonder, market participants cheered the evidence of improvement in the US employment. Nevertheless, there is a fly in the ointment. Large US companies have reported a wave of layoffs. This is a worrisome signal that the US labor market has to go a long way until its full recovery.
Some currencies vulnerable to external headwinds have already stalled growth and entered the phase of the downward correction.
The Australian dollar shed 0.5%. So, the AUD/USD pair fell to 0.6929. Previously, the currency pair climbed as high as 0.7001 in the recent month.
The Chinese yuan also lost footing, logging a 0.2% decline. Currently, the renminbi is trading at 7.0115 against the US dollar, weaker than the previous high of 6.9808.
To sum up, investors are puzzled about prospects in global currency markets. One thing is certain that the coronavirus determines market sentiment and requires cautious investment. Things could turn upside down anytime.
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