The dollar dived against the euro and yen on Monday. This caused a drop in oil priced combined with coronavirus fears to drive U.S. yields to once-unbelievable lows.
The number of people infected with the coronavirus has topped 107,000 across the world as the outbreak reached more countries and caused more economic disruption.
After Saudi Arabia stunned markets with a pledge to slash prices and boost production, oil prices collapsed 30%. It is also following the collapse of an OPEC supply agreement. [O/R]
Panicked investors rushed to the safety of bonds, sending 30-year U.S. yields beneath 1% and 10-year yields under 0.5%, all but eliminating what was once the dollar’s chief attraction. [MTKS/GLOB]
In hectic trade, it fell 3% against the yen to 101.58, its lowest in three years. The euro EUR= was last up 1% at $1.1408, while the Australian AUD=D3 and New Zealand NZD=D3 dollars were down close to 2% with the fearful mood.
The Australian dollar last traded at $0.6540, having recovered from its drop to $0.6311, while the dollar last sat at a 17-month low against a basket of currencies =USD.
Meanwhile, the oil price fall triggered withering sell-offs in oil exporters’ currencies.
The Russian rouble RUB= and Mexican peso MXN= each fell as much as 6% against the dollar. The Norwegian krone NOK=D3 shed 3% to hit a record trough. The Canadian dollar CAD=D3 fell 1.6% to 1.3640 per dollar, its lowest since 2017.
Foreign Exchange is Eventually Down
“It is totally wild,” said Shafali Sachdev, head of FX Asia at BNP Paribas Wealth Management in Singapore. “Everyone has been expecting it for a while, but just the speed of the move has taken everyone by surprise,” she said.
“This is not a train I want to be getting in front of, and how long it continues and where it goes from here is going to depend on how the situation evolves,” she added, saying further stock falls could drive even more gains in funding currencies.
“This fall in the oil price just comes at the worst time, or at least that’s how financial markets are reading it,” said Paul Mackel, head of emerging markets FX research at HSBC in Hong Kong.
“Volatility across assets is overshadowing any type of silver lining from a fall in the oil price,” he said, adding it was hard to tell when fear and nerves would subside.