Dollar Regains Ground as Coronavirus Spreads Globally

By Noreen Burke

Investing.com - The dollar regained ground against a currency basket on Monday as a surge in new cases of coronavirus globally, most notably in Italy, renewed concerns over the economic impact of the outbreak.

Authorities in Italy imposed a quarantine in the north of the country to try to halt what is the largest outbreak of the virus in Europe, with the number of cases jumping to above 150 on Sunday from just three before Friday.

in South Korea the number of infections has surged to more than 700 with seven deaths and Iran has confirmed 43 cases and eight deaths.

On Monday China reported only 11 new cases outside Hubei province, where the virus originated, indicating that the spread of the virus in the rest of the country has slowed.

Chinese authorities have been urging business to resume work in order to spearhead a recovery in the world’s second largest economy.

"The omens are not particularly good today," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney. "The presumption was that we would see intermediate supply chains quickly reconnected and I think the market's had to go through a period of questioning that logic."

The Australian and New Zealand currencies remained on the back foot, with the Aussie hitting a fresh 11-year low overnight and the kiwi shedding half a percent.

Heightened risk aversion, which also saw stocks tumble and gold and bonds rise, offered some support to the traditional safe haven yen, but concerns over Japan's virus exposure still weighed.

The dollar was trading at 111.39 per yen by 3:56 AM ET (8:56GMT), down 0.2%.

"The market reaction to the coronavirus appears to be evolving, beginning to differentiate the currencies vulnerable to the virus from the rest," Barclays analysts said in a note.

"U.S. dollar assets provide relative attractiveness," they wrote. "In fact, our economists forecast no impact on U.S. growth from Covid-19, with relatively few domestic incidents and a low dependency on China's economy."

Against a basket of currencies, the U.S. dollar index crept back toward an almost three-year peak touched last week, before soft economic data knocked it from its perch on Friday.

It was higher against the euro at 1.0821 and the British pound at 1.2919.

--Reuters contributed to this report

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