Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Safe-haven currencies gain on worries of lingering economic pain

Published 06/11/2020, 09:18 PM
Updated 06/11/2020, 09:20 PM
© Reuters.

© Reuters.

By Hideyuki Sano

TOKYO (Reuters) - The safe-haven Swiss franc and the yen held on to gains on Friday while the U.S. dollar also held firm against riskier currencies after global stock prices tumbled on renewed doubts over the prospects of a quick recovery in the global economy.

Doubts over the economy stemmed in part from the U.S. Federal Reserve's dire economic assessment as well as fears over new coronavirus infections, though some analysts said a stock market correction was inevitable after a rally.

The Swiss franc rose to 0.94395 per dollar , having hit a three-month high of 0.9376 on Thursday.

The franc has recovered its lost ground against the euro over the past two weeks to trade at 1.0665 to the euro (EURCHF=).

The yen also rose to 106.79 yen per dollar . It hit a one-month high of 106.58 on Thursday, having gained 3.1% from a 2-1/2-month low hit just a week ago.

Following its two-day meeting, the Fed signalled on Wednesday it plans years of extraordinary support for the U.S. economy, which policymakers project will shrink by 6.5% in 2020, with the unemployment rate at 9.3%.

Although that appears to have triggered selling in shares, analysts have said Fed officials have been cautious all along, especially compared to the bullish mood in financial markets until earlier this year.

"It is almost mudslinging to blame the stock falls on the Fed's dour assessment. Most market players have acknowledged that the stock rally has been driven by excess liquidity and the Fed's accommodative stance is unlikely to push stocks lower," said Makoto Noji, chief currency strategist at SMBC Nikko Securities.

"In short, it was a correction from an overbought market, which should not last long. But what we should be careful is that the market's fall could continue if we have more bad news from China and Europe for instance."

The tensions between the United States and China have shown limited signs of abating while Europe is facing tough negotiations next week on its recovery fund plan.

Investors were also worried about new coronavirus infections as the world gradually reopened following shutdowns aimed at curbing the spread of the disease.

In the United States, new infections are rising slightly after five weeks of declines, according to a Reuters analysis.

Part of the increase is due to more testing, which hit a record high on June 5 of 545,690 tests in a single day but has since fallen.

The dollar held firmer against risk sensitive currencies.

The euro stood at $1.1299 (EUR=), off Wednesday's three-month high of $1.14225.

Similarly, the British pound slipped to $1.2582 from Wednesday's high of $1.2812.

The Australian dollar tumbled to $0.6838 , having fallen 2% in the previous session, the biggest daily fall since the market turmoil of March.

© Reuters. A picture illustration of Swiss Franc and Euro banknotes taken in central Bosnian town of Zenica

The Mexican peso lost 3.8% and dipped further in Asia to 22.85 to the dollar .

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.