Concerns over the potential impact on global economic growth of a fast-spreading coronavirus outbreak sent investors seeking safe-haven assets.
Worries about the impact on the world’s second-biggest economy rattled markets. A Chinese government economist on Wednesday said China’s economic growth may drop to 5% or even lower due to the coronavirus outbreak.
The virus has spread to more than 10 countries and has already killed 170 people in China.
Federal Reserve chair Jerome Powell acknowledged the risks of a short-term slowdown in China, including to the U.S. economy, following the central bank’s widely expected decision to keep interest rates unchanged.
The World Health Organisation (WHO) will reconvene on Thursday to decide whether the coronavirus outbreak constitutes a global emergency.
As the new pneumonia-like disease spread quickly in China, the dollar is emerging as an ultimate safe-haven destination. Its high interest rates relative to the rest of its developed market peers also boosting its appeal.
On the UK and BoE front, the central bank kept interest rates steady on Thursday. The concept behind the decision was that signs that Britain’s economy had picked up since December’s election, and that the global economy had stabilized, meant further stimulus was not needed now.
START TRADINGForex – Coronavirus outbreak hits risk appetite
Risk aversion also knocked the Aussie and the Kiwi dollars lower while the Japanese yen and the Swiss franc strengthened.
The dollar is the best performing currency among G10 currencies in January, with the dollar index rising 1.6% so far this month to hit a two-month high. Among the biggest losers this month is the Aussie, which has lost 3.9% so far this month, the second worst performing currency in the G10.
The dollar index last stood at 98.04, flat on the day but not far from Wednesday’s two-month high of 98.19. The greenback is now up 1.8% against a basket of major currencies so far in 2020, ahead of a Federal Reserve meeting later on Wednesday.
The yen firmed 0.1% to 108.90 yen per dollar, edging close to a three-week high of 108.73 touched last week. The Japanese currency has fallen 0.3% against the dollar so far this month.
Britain’s pound headed back towards $1.31 on Thursday after the Bank of England kept interest rates at 0.75%.
Sterling rose to a high of $1.3095, up 0.6% on the day. Against the euro, the currency gained 0.5% to 84.16 pence.
Gold prices held onto gains on Thursday, supported by concerns over the potential impact of the fast-spreading coronavirus outbreak in China.
Spot gold was up 0.2% to $1,579.63 per ounce by 1220 GMT after rising 0.7% on Wednesday. U.S. gold futures were 0.6% higher at $1,579.00 per ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money