Fears heighten as the virus may grip economies globally, not just Asia
The spike higher in the number of cases in South Korea and Italy are among the main talking points surrounding the coronavirus outbreak, and that is spreading fear across the market as we kick start the new week.
Risk is off as we see commodity currencies take a hit with the likes of the aussie and kiwi tracking lower once again. AUD/USD made fresh decade lows to start the day amid a gap lower but is sticking closer to 0.6600 for now.
The loonie is also marked lower amid weaker oil prices and the virus outbreak threatens to hit other countries more directly, possibly softening demand even further.
Meanwhile, the dollar is keeping firmer on the day as it keeps gains against most major currencies. The yen leads the way but gains have largely eased, with USD/JPY rising from 111.22 during early morning trade to 111.57 currently.
It is all about risk as the market tries to come to terms with the severity of the coronavirus outbreak and if the situation can really be controlled. The fear is that this may spread well outside the realms of Asia and also impact other major economies globally.
That will mean not just an indirect hit from China's economic slowdown, but also a real fear that this could hit the likes of Europe and maybe US in due time.
Looking ahead, I would expect the risk-off mood to keep up in the European morning and I'd be wary of further risk aversion at this stage. If the market can find reason for optimism in this kind of environment, that would really be something.
In any case, also just watch out for month-end flows during the course of the week.
