It is a brand new week on the financial markets, but it appears that many of the topics of the previous weeks will remain the chief focus of investors.
First of all, we have the utter dominance of the US dollar on the market. The USD managed to push the weak euro to three-year lows, and the Australian dollar to its lowest level in 11 years. Besides an excellent domestic economic performance boosting the dollar, the reserve currency is also banking on its safe haven status as investors flee the coronavirus risk. Gold is another safe haven that is doing well right now, reaching a seven-year high.
Though the Japanese yen normally serves as a reliable safety asset, it is not performing well right now, as Japan itself struggles with several hundred patients infected with the Covid-19 virus. Neighboring South Korea has recently seen a spike in cases there as well, with now over 800 people infected and several deaths.
After China started closing down factories and public transport, and also cancelling public events such as expos and conferences, now Japan and South Korea might have to do the same to prevent the further spread of the virus.
The virus is also spreading in Central Asia and Europe, with Iran and Italy registering more and more cases.
The current strength of the US dollar is pressuring developing markets. Argentina, which had an IMF bailout in 2018, is still struggling with its economic crisis. The IMF is currently looking after Lebanon, which might also be on the verge of needing a bailout. Other developing markets such as Ukraine and Egypt are also attracting the IMF’s attention with potential crises in the making. Most public debt and loans are done in US dollars, which is why the USD’s appreciation is bad for developing countries.
