Dollar gains on strong private payrolls, report of virus treatment

Japanese 10,000 yen and U.S. 100 dollar banknotes are arranged for a photograph in Tokyo, Japan, on Sept. 7, 2017.
Tomohiro Ohsumi | Bloomberg | Getty Images

The dollar gained against the safe-haven yen and Swiss franc on Wednesday, as risk appetite rose on reports of a possible treatment for the new coronavirus out of China that has gripped the world and caused major disruptions among global businesses.

The U.S. currency also benefited from a private-sector payrolls report for January that surpassed market expectations, suggesting the world's largest economy was on a stable growth path and interest rate cuts were off the table for now.

The focus, though, remained on the coronavirus, which has claimed 490 lives, most in and around the locked-down central city of Wuhan, where the new virus emerged late last year. There have been two deaths outside mainland China: in the Philippines and Hong Kong, both following visits to Wuhan.

But the yen and Swiss franc fell after media reported a Chinese university had found a drug to treat people with the virus, while researchers in Britain had made a "significant breakthrough" in finding a vaccine. While the Chinese report was a day old and the British report indicated the research trials were in early stages, traders used the headlines to load up on risky assets.

"The market is starting to brush off the coronavirus," said Erik Nelson, currency strategist, at Wells Fargo Securities in New York. "What's driving this are some of the headlines on possible vaccines. So there is some optimism about having potentially a way to treat the symptoms from having the coronavirus."

Risk sentiment also improved after U.S. private-sector payrolls increased by 291,000 in January, according to the ADP National Employment Report, far above expectations of an increase of 156,000 jobs.

January's job gains were the largest since May 2015. In addition, U.S. services sector activity picked up last month, with industries reporting increases in new orders. The Institute for Supply Management's non-manufacturing activity index rose to 55.5 last month, the highest level since August.

"The U.S. has shown quite a bit of resilience for a long time and to the extent that the global economy is going to turn the corner, that's good for the U.S.," said Wells Fargo's Nelson.

In afternoon trading, the dollar rose 0.3% against the yen to 109.79 yen, after earlier rising to a two-week high of 109.84 yen. It also rose 0.5% versus the Swiss franc to 0.9735 franc.

The euro, meanwhile, fell 0.4% to $1.0994, pushing the dollar index up 0.3% at 98.29.