CHF Gains on Coronavirus Scare; SNB Probably Intervened24 February 2020
Coronavirus outbreak is spreading outside China, as many cases have been reported in Italy, South Korea. Safe haven assets gains, including CHF. Meanwhile it looks the SNB has intervened on currencies market.
Not in Risky Mood
As coronavirus is spreading across other countries than China, especially with a huge rise in cases in last few days in the northern Italy, prices of stock and commodities, exchange rates of currencies are vastly influenced. Safe haven assets are gaining, including, CHF. On Monday stocks in Europe went down. Swiss franc exchange rate was at 1.06130 per euro on Friday, on Monday it changed a little, hitting 1.0606 francs, which is very close to the strongest level in five years. Considering the situation though, both well-established safe have currencies, which are Swiss franc and Japanese yen, have not went up significantly. It is due to the fact that many investors choose not to buy Swiss francs or yens, but US dollars, even in times of global epidemic scare. US economy so far looks like more prepared for impact of virus on the global economy. Especially the Japanese yen exchange rate has been a disappointed in times of troubles caused by coronavirus. JPY went up by just 0.2% to 111.38 per dollar. Analysts claim it is due to the exposure of Japan to coronavirus, as Asia is the place where it appeared first and has the most cases so far. Traditional safety value of the Japanese yen is discounted in such case.
Nevertheless, CHF exchange rate is getting higher day by day, and the Swiss National Bank may have felt the need to step up with its interventions aiming at stopping CHF from being too overvalued. It actually looks like the bank may have intervened as lately as last week. Sight deposit, which is the amount of cash held by commercial banks at the central bank, went up by 2.1 billion francs last week. It was the biggest increase since the beginning of the year. The SNB uses interventions together with minus interest rates as part of its policy to keep inflation in line and prevent CHF from getting too expensive. However, it does not inform when exactly it has intervened on currencies market, which makes analysts look out for sight deposit as signs of the SNB actions. Newly discovered activity was still lower than that in August.
EUR Is Weaker
The common currency of euro zone got weaker on Monday, as investors were not prone to buy euro, but rather invested in USD. EUR exchange rate went down by 0.3% to 1.0805 dollars, which is level close to 1.0778, hit last week and being the lowest in almost three years. Due to the coronavirus epidemic, the exchange rate EUR/USD is expected to fell even lower, as analysts claim. USD price was not influenced even by below expectations economic data published last week. Against the basket of major currencies, USD index went up by 0.2%, with 99.622 level, close to its strongest point since April 2017 – 99.915, hit last week.