The American currency still seems to be gaining in value as one of the safe havens. The money may be coming back to the USD, along with the worsening of the coronavirus situation and weak data from the eurozone or Japan.
Yesterday the USD/JPY exchange rate rose by around 1.5 percent to the highest level since the end of April 2019. Behind such a dynamic movement not observed in this market for months was to be both macroeconomic data and information about the spread of the coronavirus. One macroeconomic report showed a sharp decline in Japanese machinery orders, raising fears that the country's economy is heading for a recession. This is the likely scenario after the terrible GDP data for the fourth quarter of 2019.
According to Bloomberg, a Japanese expert on infectious diseases warned against the need to prevent a "second Wuhan" in Japan and criticized the quarantine proceeding on the Diamond Princess. Hundreds of people aboard the ship in the port city of Yokohama were infected and two died. South Korea, meanwhile, confirmed cases of coronavirus more than doubled in one day, and authorities insist that millions of people remain at home. The social and economic situation in the region is not very good, which investors could have expressed by abandoning the yen.
The US dollar index, in turn, rose to its highest level in four months, as the EUR/USD exchange rate fell to the lowest level in three years. What's more, the AUD/USD fell to the 11-year low after rising the unemployment rate in the country to 5.3 percent from 5.1 a month ago.
Despite the strengthening of the US dollar, gold seems to be doing very well, the price has broken upper limit in the previous consolidation and it is near a seven-year high. Demand for gold appears to be rising with the fear that the coronavirus outbreak will reduce global growth, combined with speculation that the Federal Reserve will ease monetary policy by the end of the year.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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