Japanese Yen, XAU/USD Surge as Stocks Plunge on COVID-19 Risks

Japanese Yen, New Zealand Dollar, Coronavirus, Gold Prices – TALKING POINTS

  • Risk aversion from coronavirus infecting market mood early into Asia’s session
  • Japanese Yen, gold prices surged against the cycle-sensitive NZD and stocks
  • APAC equities brace for additional volatility as Wuhan virus spreads

The Japanese Yen gained at the expense of stocks and the cycle-sensitive New Zealand Dollar after risk aversion from the spread and impact of the coronavirus infected market mood. Gold prices gapped higher as expectations for additional easing from central banks boosted demand for anti-fiat hedges.

NZD/JPY, AUD/USD, XAU/USD, S&P 500 Futures – Daily Chart

S&P 500 futures chart created using TradingView

Over the weekend, central banker governors and finance ministers convened in Saudi Arabia for the G20 summit in Riyadh. There, policymakers discussed the coronavirus and assured markets that they are prepared to act in order to buffer the impact of COVID-19. During the conference, the IMF also warned that the virus could shave off as much as 0.1 percent of global GDP.

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According to the Managing Director Kristalina Georgieva, Chinese growth is expected to slow to 5.6 percent as regional growth faulters with the Asian giant. The export-oriented South Korean economy appears particularly vulnerable as the Finance Minister warned that the coronavirus could jeopardize the country’s economy recovery. He also said policymakers are willing to take “extraordinary measures” to buffer the impact.

Looking ahead, markets will likely continue to be held hostage by updates from the spread of the coronavirus and anxiously waiting for economic data to reveal how much it has ismpacted growth. Last week, US flash PMI data registered alarming figures, largely as a result of reduced tourism, air travel demand and disrupted supply chains from the virus. Similar concerns throughout the week may put a discount on commodity-linked FX – like AUD, NZD and NOK – and a premium on anti-risk assets like JPY and USD.


— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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