A Look at Safe-Havens Amidst the Coronavirus Outbreak
by
The outbreak of the Coronavirus, much like Iran, has abruptly impacted currency and commodity markets.
In times of political or economic uncertainties, analysts have historically recommended investing in safe-haven assets. Typically, the most common assets associated with safe-havens are the Japanese yen and gold.
High degrees of uncertainty can spark investor fear, which can abruptly affect markets. This is especially true in stock markets as well as commodity and FX markets.
During troubling times, safe-havens are the destination for investment, while more volatile assets such as emerging markets currencies experience notable declines.
This trend was on full display recently with the tensions growing between the US and Iran earlier this month.
With the severity of the fallout from the USβ actions in the region uncertain at best, or how precisely Iran would retaliate, investors grew concerned.
The conflict started on January 3 and the escalation continued until January 8, while tensions eventually abated. Safe-haven assets were expected to strengthen and for the most part did.
Is the JPY still a safe-haven?
In terms of the Japanese yen, there were more factors holding sway, causing many investors to rethink the currency as a true safe-haven.
First, there has been a willingness from domestic asset managers to buy higher-yielding foreign assets. Additionally, there is a trade deficit of Japan, which has impacted the JPY, in tandem with overseas capital flows of Japanese companies.
Investors have also had to grapple carry trade strategies. This idea of a carry trade is to borrow the low-interest currency and invest in the higher-interest currency.
However, since late 2019, the major central banks have been easing their monetary policy.
The basis of the loose policy is the lower interest rates. That means the advantage of the Japanese yen as a low-interest currency has been vanishing.
This year, the central banks are anticipated to hold the rates unchanged. This factor has not lent to supporting the Japanese yen.
By extension, lately analysts have come to believe the euro, with its extremely low rates, can be more attractive for carry-trade traders.
Impact of virus outbreak in China
More recently, the Coronavirus in Wuhan, China has also impacted currency markets. Much like the Iranian political tensions seen earlier this month, this virus has indeed seen a notable strengthening of the JPY, particularly against the USD and other currencies.
After peaking at a monthly high on January 18, 2019, the USDJPY has fallen each day and is approaching monthly lows, not seen since the January 5.
With the situation worsening, the pair is expected to touch or exceed monthly lows as China has taken additional steps to quell the outbreak of the virus to limited effect.
The stability of gold
Gold is the other safe-haven asset thatβs been a tried and true strategy for any investors during periods of turmoil. This was true during the Iranian-US fallout and especially now with the Coronavirus in China.
The price of the yellow metal has mirrored perfectly the deteriorating circumstances in both Iran and China, with each seeing the notable strengthening of gold.
In particular, against the XAUUSD pair has been gaining in recent weeks and is expected to continue with no sign of slowing down.
There are now global fears radiating out of China as the local government has been figuring out ways of quarantining the virus.
Any expected uptick in cases or a further outbreak would see investors continue to flock towards gold, increasing its value.
Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.
In times of political or economic uncertainties, analysts have historically recommended investing in safe-haven assets. Typically, the most common assets associated with safe-havens are the Japanese yen and gold.
High degrees of uncertainty can spark investor fear, which can abruptly affect markets. This is especially true in stock markets as well as commodity and FX markets.
During troubling times, safe-havens are the destination for investment, while more volatile assets such as emerging markets currencies experience notable declines.
This trend was on full display recently with the tensions growing between the US and Iran earlier this month.
With the severity of the fallout from the USβ actions in the region uncertain at best, or how precisely Iran would retaliate, investors grew concerned.
The conflict started on January 3 and the escalation continued until January 8, while tensions eventually abated. Safe-haven assets were expected to strengthen and for the most part did.
Is the JPY still a safe-haven?
In terms of the Japanese yen, there were more factors holding sway, causing many investors to rethink the currency as a true safe-haven.
First, there has been a willingness from domestic asset managers to buy higher-yielding foreign assets. Additionally, there is a trade deficit of Japan, which has impacted the JPY, in tandem with overseas capital flows of Japanese companies.
Investors have also had to grapple carry trade strategies. This idea of a carry trade is to borrow the low-interest currency and invest in the higher-interest currency.
However, since late 2019, the major central banks have been easing their monetary policy.
The basis of the loose policy is the lower interest rates. That means the advantage of the Japanese yen as a low-interest currency has been vanishing.
This year, the central banks are anticipated to hold the rates unchanged. This factor has not lent to supporting the Japanese yen.
By extension, lately analysts have come to believe the euro, with its extremely low rates, can be more attractive for carry-trade traders.
Impact of virus outbreak in China
More recently, the Coronavirus in Wuhan, China has also impacted currency markets. Much like the Iranian political tensions seen earlier this month, this virus has indeed seen a notable strengthening of the JPY, particularly against the USD and other currencies.
After peaking at a monthly high on January 18, 2019, the USDJPY has fallen each day and is approaching monthly lows, not seen since the January 5.
With the situation worsening, the pair is expected to touch or exceed monthly lows as China has taken additional steps to quell the outbreak of the virus to limited effect.
The stability of gold
Gold is the other safe-haven asset thatβs been a tried and true strategy for any investors during periods of turmoil. This was true during the Iranian-US fallout and especially now with the Coronavirus in China.
The price of the yellow metal has mirrored perfectly the deteriorating circumstances in both Iran and China, with each seeing the notable strengthening of gold.
In particular, against the XAUUSD pair has been gaining in recent weeks and is expected to continue with no sign of slowing down.
There are now global fears radiating out of China as the local government has been figuring out ways of quarantining the virus.
Any expected uptick in cases or a further outbreak would see investors continue to flock towards gold, increasing its value.
Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.
FXIFY Celebrates 1 Year Anniversary: Establishing Itself as an Industry Leader
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now π https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africaβs premium financial event for a transformative experience that combines the best of finance and technology.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africaβs premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now π https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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#fmas #fmas24 #fmevents #networking #finance #africa
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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