NEW YORK (Reuters) - The safe-haven Japanese yen and Swiss franc gained on Thursday, as expectations receded that the global economy would recover swiftly from the coronavirus pandemic after a U.S. central bank policy meeting.
FILE PHOTO: A Japan Yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White/Illustration
The yen rose to a one-month high against the dollar, while the Swiss franc climbed to a fresh three-month peak.
The Fed, after a two-day meeting, signaled on Wednesday that it plans years of extraordinary support for the U.S. economy, which policymakers project will shrink by 6.5% in 2020, and the unemployment rate will be 9.3%. Interest rates are also expected to remain near zero until the end of 2022.
Investors were also worried about new coronavirus infections as the world gradually reopened following shutdowns aimed at curbing the spread of the disease.
Shaun Osborne, chief FX strategist, at Scotiabank in Toronto said the Fed’s dire pronouncement squashed “all over the stock market’s idea of a V-shaped rebound.”
He said the market was also concerned about signs of a second wave of virus infections, with a jump in cases noted in Seoul and signs from some U.S. states that reopened earlier of an increase in new cases.
In the United States, new infections are rising slightly after five weeks of declines, according to a Reuters analysis. Part of the increase is due to more testing, which hit a record high on June 5 of 545,690 tests in a single day but has since fallen.
“With risk appetite chilled, FX markets have reverted to something more of a traditional response—the Swiss Franc and Yen are outperforming,” Osborne added.
In mid-morning trading, the dollar fell 0.5% against the yen to 106.64 yen, after earlier dropping to a one-month trough.
The dollar also slid to a three-month low versus the Swiss franc of 0.9399 franc, and was last at 0.9401 franc.
Against a basket of its rivals, the dollar weakened 0.1% to 96.07.
The dollar showed little reaction following data that indicated U.S. initial jobless claims fell to a seasonally adjusted 1.542 million for the week ended June 6, from 1.897 million the prior week. That pulled initial claims further away from a record 6.867 million in late March.
U.S. producer prices, however, were higher, up 0.4% in May, amid a surge in the cost of meat.
The euro rose, leaving open the possibility of more downside for the dollar once the dust settles. The single currency was last up 0.3% at $1.1397.
High-beta currencies heavily geared towards global growth, such as the Australian dollar and the Norwegian crown, led losers in the currency space, falling more than 1% against the dollar.
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by Bernadette Baum
https://uk.reuters.com/article/global-forex/forex-yen-franc-advance-after-feds-bleak-outlook-worry-over-second-wave-of-infections-idUKL8N2DO3TJ
2020-06-11 14:56:00Z
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