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The yen, much in demand; a virus unleashes risk aversion

The yen, much in demand; a virus unleashes risk aversion


The Japanese yen is in high demand on Tuesday as a good currency considered safe haven, because of the outbreak in China of a virus similar to pneumonia that has triggered a burst of risk aversion.

At 9:30 a.m. (CET), the yen rises 0.2% against the dollar, with USD / JPY at the 109.97 level. The Chinese yuan has been shaken, down 0.6% against the greenback, placing the USD / CNY at 6,9072. On the other hand, the EUR / USD reaches the level of 1.1089 and the GBP / USD stands at 1.3005, when attention is directed to the ZEW index in the case of Germany and to the employment data in the case from United Kingdom. The dollar index futures , which follows the evolution of this currency with respect to a basket of six other major currencies, remains basically unchanged at 97.39.

The disease outbreak, which has spread from the central city of Wuhan, is still in its early stages. So far four deaths have been confirmed, but with the high travel season during the Lunar New Year festivities, the risk of further spread is increasing.

The impact of the 2002 SRAG epidemic is still very much in the memory of many people. On that occasion, more than 8,000 people from 37 countries were affected, the deaths amounting to around 800.

Until now, movements in the currency market have been quite restricted, and traders are quite optimistic about the situation.

“There is no doubt that the virus will eventually be contained, it’s just a matter of when, and if it goes up the scale of magnitude,” said Kay-Van Petersen, a global macroeconomics strategist at Saxo Bank, in a research note.

He added that it is difficult to imagine a case in which this becomes super negative for the actions of China and by extension for the yuan, “unless it somehow induces local sales motivated by panic, but things would have to get worse. drastically for such a scenario to occur. ”

That said, it is important to remember the impact of the SARS pandemic; According to a 2003 academic study, the global economic cost amounted to about $ 40 billion or more.

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