Forex - Yen Starting to Feel Pressure from COVID-19
At 3:05 AM ET (0705 GMT), USD/JPY climbed 0.7% to 109.17. The U.S. Dollar Index, which tracks the greenback against a bin of basket of six monetary standards, remained at 100.685, relatively stable, while EUR/USD climbed 0.1% to 1.0823 and GBP/USD grew 0.1% to 1.2269.
Japan has, relatively speaking, been barely touched by coronavirus pandemic and reported slightly more than 3,600 cases, as indicated by Johns Hopkins University.
In any case, pressure is beginning to mount on the Japanese government in light of the fact that the quantity of reported cases is beginning to grow, with the number in Tokyo alone rising above 1,000. This is, however, moderately low when contrasted with the United States, as well as nations in Europe and China, where thousands of deaths from the virus have been reported.
The sudden rise in cases have prompted the Japanese Prime Minister Shinzo Abe instate a state of emergency; the announcement is expected to come later this week.
The global contagion has caused established economies, for all intents and purposes, to close down as administrations enact social distancing strategies to stem the spread of the coronavirus.
“Coronavirus cases in Japan may not peak for another month, so the markets will think that now it’s Japan’s turn. A state of emergency is necessary, but this could be yen negative,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities, on CNBC.
“The yen has been the flipside of risk appetite – falling as risk appetite improves and vice versa,” said SaxoBank, in a research note. But, with “Japan suddenly faced with mounting Covid19 problems, both as a new financial year gets underway in Japan as of April 1, the JPY crosses are an interesting subplot to the general obsession with the direction of the USD.”
The dollar continues to maintain its safe-haven appeal against the backdrop of many emerging-market currencies, with the Indonesian rupiah and the Mexican peso suffering the brunt of the fall. Compounded by their own issues with the contagion and healthcare issues, many developing markets are seriously shy of the dollars needed to reimburse mounting obligations, in part due to the fact that U.S. consumers and organizations have placed their global dollar spending on hold.