By Peter Nurse
Investing.com - The Japanese yen has seen selling Monday, with the country’s government expected to call a state of emergency in response to the coronavirus pandemic.
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 basket of six other currencies, stood at 100.685, largely flat, while EUR/USD rose 0.1% to 1.0823 and GBP/USD rose 0.1% to 1.2269.
Japan has been relatively lightly hit by the spread of the coronavirus pandemic so far, registering just over 3,600 cases, according to Johns Hopkins University.
However, pressure is starting to mount on the Japanese government because the number of cases is starting to increase, with the number in Tokyo alone topping 1,000 - still low compared with the United States, countries in Europe and China, where thousands have died.
As a result, Japanese Prime Minister Shinzo Abe is expected to declare a state of emergency this week.
The pandemic has caused developed economies to virtually close down as governments attempt social distancing policies to stem the spreading of the virus.
“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 march higher against many emerging currencies, with the Indonesian rupiah and the Mexican peso among the worst hit. In addition to their own problems with the medical emergency, many emerging markets are desperately short of dollars to repay maturing debts, now that U.S. consumers and businesses are no longer pumping dollars out into the world economy.