Safe-haven yen, Swiss franc rise on fears of virus impact

Frank van den Bergh | E+ | Getty Images

The safe-haven yen and Swiss franc gained on Friday as fears escalated about the global economic impact of the latest coronavirus outbreak in China last week.

The Australian dollar fell to a four-month low against the U.S. dollar, while China's offshore yuan struggled to find a footing in the wake of the virus outbreak.

The World Health Organization said late on Thursday that the coronavirus outbreak was a global emergency, but opposed travel restrictions and said China's actions so far would "reverse the tide" of its spread, somewhat reassuring markets. The United States and other countries, however, tightened travel curbs on Friday and businesses said they were facing supply problems because of the coronavirus in China.

"The steady drumbeat of negative headlines combined with government reactions to the spread of the virus is still roiling markets a bit and it's hard for markets to find that stability," said Brad Bechtel, managing director at Jefferies in New York.

U.S. data on consumer spending and personal income did push the dollar a little higher against the yen and euro, as core consumer prices as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month after edging up 0.1% the previous four months. That lifted the annual increase in the so-called core PCE price index to 1.6% in December from 1.5% in November.

Investors, however, remained transfixed on the casualties from the virus and feared its impact on the global economy including businesses such as airlines and hotels. The death toll rose to 213 on Friday, all in China. The number of confirmed cases in China has risen beyond 9,800, Beijing's envoy to the United Nations in Vienna said, while some 131 cases have been reported in 23 other countries and regions.

China's offshore yuan gave up earlier gains and was last down against the dollar. The U.S. currency added 0.1% to 6.9884 , although that was some way off the 7.0038 level the yuan dropped to on Thursday.

The dollar fell 0.54% against the yen to 108.36 yen, and dropped 0.3% versus the Swiss franc to 0.9668 franc.

The Australian and New Zealand dollars, both sensitive to sentiment in China, fell to new multi-month lows. The New Zealand dollar dropped 0.5% to US$0.6464, after earlier touching a two-month low.

The Australian dollar lost 0.3% to US$0.6699, hitting a four-month low earlier in the session. Both have shed more than 1.5% this week and the Aussie has dropped more than 4% this month, leaving it poised for its worst month since May 2016.