Black Friday for FX Markets Over New Virus Variant in S.Africa
The Nigerian local currency, naira, depreciates in the foreign exchange markets, both official and autonomous FX rates worsened amidst a slowdown in global prices of oil.
ING said that financial market sentiment had been hit by the news that a new COVID-19 variant was spreading in Southern Africa. While the bank awaited more information on the new strain, ING noted the oversold yen (JPY) was getting a major lift and pro-cyclical currencies were dropping.
Overnight Thursday, ING saw the yen gain nearly 1% against the U.S. dollar (USD) while pro-cyclical currencies followed global stocks lower after the concerning news about a new COVID-19 variant that appeared to have the biggest mutation seen so far.
The most notable previous virus variants proved, in general, to be also more transmissible and more lethal than the first COVID strain, and scientists were attempting to evaluate whether this was the case as well.
At a very early stage, the evidence seemed quite concerning, wrote the bank in a note to clients. The variant had been identified primarily in South Africa, and multiple countries were rapidly blocking all flights to the country, as well as other African nations.
The rand (ZAR) was unsurprisingly a major underperformer, having dropped to one-year lows and still looking quite vulnerable.
More information on the variant will be needed, but it looked like it was indeed going to be a very “black” Friday for global risk sentiment. JPY and Swiss franc (CHF) should remain a favourite choice as safe-haven hedges above the USD, which should however remain supported against all the pro-cyclical bloc.
Norway’s NOK, Australia’s AUD and New Zealand’s NZD appeared particularly at risk, added ING. As the United States market returned for half a day of trading following the Thanksgiving holiday, ING could see more risk-off trades in foreign exchange (FX). #Black Friday for FX Markets Over New Virus Variant in S.Africa