Risk currencies step on solid ground, demand for safe havens subsides

Risk currencies steadied on Wednesday as investors took stock of the economic damage from the outbreak of the coronavirus.

As countries step up efforts to contain the spread of the deadly new virus, flight-to-quality bids in safe-haven currencies such as the yen and the Swiss franc subsided for now.

President Xi Jinping said on Tuesday that China was sure of defeating the “devil” coronavirus while international alarm was rising as the outbreak spread across the world.

The number of patients and death toll is rising day by day, nor do we know when vaccine will be ready.

Yet, at the very base of market there is underlying optimistic sentiment, limiting risk-off moves.

Behind investors’ tolerance of risks are their expectations of policy support from the world’s central banks.

The Fed is expected to keep its policy on hold later today and is likely to repeat its mantra that a “material reassessment” of the economic outlook would be required for any change in interest rates.

Some think a mere mention of risks from the coronavirus may spark speculation the Fed could dole out more stimulus if the U.S. economy is hit by fallouts from the outbreak.

 Trader Georgi Bozhidarov

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