Forex: The Dollar is sought-after, helped by the status of refuge

By Peter Nurse

The u.s. dollar remained sought after on Tuesday, boosted by its safe haven status while the epidemic of coronavirus continues to spread, and also by the signs of strength in the u.s. economy.

At 11.15, EUR/USD was trading at 1,0913, slightly up on the day, after falling to a low of four months on Monday. Similarly, GBP/USD is trading at 1,2929, up 0.1%, after having touched a low of two months to 1,2870$ Monday. Futures on the Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 98,773, up 0.1%, after having climbed up to 98,858 Monday, its highest level since mid-October.

The number of deaths from the coronavirus continues to increase, over 1 000 victims in China mainland, and infecting more than 40,000 people.

The return measures for workers and traffic flow of passengers in China have suggested that the virus had “a devastating impact on the chinese economy in January and February,” said analysts from Nomura in a research note.

The anticipation of a drop in demand in china has maintained the currency similar to those of the commodities on the defensive in recent weeks, the Aussie is still near a 10-year low and the brazilian real, the Russian ruble and the rand in South Africa have fallen 3.7% to 5.6% over the last month.

“The impact of the coronavirus, pushing the money towards the u.s. dollar,” said the analyst of Westpac FX Imre Speizer in a Reuters report. “You have seen a good series of economic data in the United States, it is an other support.”

Friday, non-farm employment in the United States for December continued to show strong employment growth, while the investigations of trust have tended to surprise to the upside.

The attention now turns to the testimony of the president of the federal Reserve’s Jerome Powell before Congress on Tuesday and Wednesday.

The Fed has clearly indicated its intention to keep its powder dry on interest rates in the near future.

The speech of the president of the European Central Bank, Christine Lagarde, at 15.00 will also be interesting. The central bank is in a full strategic review of major, and any comments by Lagarde on the issue of whether it modifies its inflation target will be interesting. The chief economist Philip Lane and the new member of the board of directors, Isabel Schnabel, should also take the floor during the day.

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