News of a SARS-CoV-2 variant potentially resistant to current vaccines sent investors dashing for the safety of the Japanese yen and the Swiss franc on Friday, and traders also took profits after an extended rally in the US dollar.
The gains in the yen and the Swiss franc came at the expense of the growth-sensitive Australian dollar and Norwegian krone, although thinner volumes after Thursday’s US Thanksgiving holiday made market moves more volatile.
The US is to restrict travel from South Africa — where the new mutation was discovered — and neighboring countries beginning tomorrow, a senior official from the administration of US President Joe Biden said.
The WHO said it was designating the variant, named Omicron, as “variant of concern,” a label applied only to four variants to date. It could take weeks for scientists to fully understand the variant’s mutations and potential dangers.
“If we’re looking at something like this where we have new mutations on mutations of a spike protein it almost feels like the initial working assumption for most market participants is that this is a new phase of the pandemic,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
“New lockdowns and restrictions will maybe be put in place, and it certainly feels like we’re going to need a new vaccine as well,” he added.
One of the main gainers was the yen, which bounced off five-year lows hit this week against the greenback, and jumped almost 2 percent to a high of ￥113.09, its best day since March last year.
The euro rose 0.97 percent to a high of US$1.1312, although it fell to more than six-year lows against the resurgent Swiss franc, at SF1.0428 per euro.
“This is a textbook flight to quality into yen and the Swiss franc on the new virus strain, with the thin liquidity also a factor, which may accelerate the unwinding of short bond positions,” Kenneth Broux, a strategist at Societe Generale SA in London, said.
Speculative accounts had been massively short safe-haven assets, with US CFTC figures showing net bearish positioning at US$1.2 billion and US$10.3 billion for the yen and Swiss franc respectively in the latest week.
In Taipei, the New Taiwan dollar on Friday fell against the US dollar, losing NT$0.035 to close at NT$27.836, down 0.15 percent weekly.
The US dollar index on Friday dipped 0.75 percent to 96.030, after reaching a 16-month high of 96.938 on Wednesday. The index is unchanged for the week.
It has jumped from 93.872 on Nov. 9 as investors increased bets that the US Federal Reserve will begin raising interest rates in mid-2022 to thwart stubbornly high inflation.
Sterling briefly slipped to a new low for this year below US$1.3278 as the jitters prompted some to scale back bets on an interest rate hike next month.
In the cryptocurrency market, bitcoin fell to as low as US$53,524, the lowest since Oct. 10, while ethereum dropped to US$3,917, the lowest since Oct. 28.
Additional reporting by CNA, with staff writer
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