How the dollar could trade on Trump's coronavirus diagnosis

Published Fri, Oct 2 20206:55 AM EDTUpdated Fri, Oct 2 20207:42 AM EDT

News that President Donald Trump tested positive for the coronavirus early Friday jolted global financial markets. Currencies were no exception. The U.S. dollar, seen as a safe haven in times of uncertainty, rose 0.7% against the Australian dollar after the president tweeted confirmation of his diagnosis. The euro fell 0.3% against the greenback, while the dollar index — which measures the greenback against a basket of major currencies — rose 0.2% initially but pared some of those gains. Despite the dollar's rise early Friday, strategists aren't convinced the news will spark a longer-term move higher. "It is … in the long run, I think, not positive for the dollar," Kit Juckes, global head of foreign exchange strategy at Societe Generale, told CNBC's "Squawk Box Europe" Friday. "In the short term, it's a different story. In the short run, it's all about safe havens, gut reactions and flight to quality." He highlighted that the dollar's broad weakness so far this year was a result of the dramatic monetary easing by the U.S. Federal Reserve , as the central bank attempts to bolster the American economy in the face of the coronavirus pandemic and associated lockdowns. Looking ahead to the U.S. election on Nov. 3, Juckes said the dollar would likely have further to fall if the next U.S. president is a Democrat, compared to if it remains Trump. But he added: "Additional uncertainty — any health concerns anybody had about a president — that would just add to that sense that this is not going to be as easy for the American economic exceptionalism to continue." "That said, I don't want to overplay the role of president in providing the degree of economic outperformance in recent years," he said. The safe-haven play White House physician Dr. Sean Conley said in a memo early Friday that the president and first lady, who also tested positive for the coronavirus, were both "well at this time." He also said he expected Trump to "continue carrying out his duties without disruption." Jane Foley, head of foreign exchange strategy at Rabobank, said the fact that Trump was said to be in good health could limit the degree of uncertainty in markets for now. "But if that changes, the market is going to become potentially a lot more risk adverse," she told CNBC's "Street Signs Europe." More broadly, she said the additional uncertainty in markets as a result of Trump's diagnosis was likely to impact on so-called safe havens. "That uncertainty alone is probably going to drive ... more investors into buying safe havens than there would be otherwise. So from that point of view, it's probably dollar positive, certainly Treasury positive and certainly yen positive," Foley added.

News that President Donald Trump tested positive for the coronavirus early Friday jolted global financial markets.

Currencies were no exception. The U.S. dollar, seen as a safe haven in times of uncertainty, rose 0.7% against the Australian dollar after the president tweeted confirmation of his diagnosis. The euro fell 0.3% against the greenback, while the dollar index — which measures the greenback against a basket of major currencies — rose 0.2% initially but pared some of those gains.

Despite the dollar's rise early Friday, strategists aren't convinced the news will spark a longer-term move higher.