Yen and Swiss franc gain

Investors fled to the safety of the Japanese yen and the Swiss franc after learning of a coronavirus variant that may be resistant to current vaccines. At the same time, traders also took profits following an extended rally in the U.S. dollar.

The yen and franc rose against the growth-sensitive Australian dollar and Norwegian crown. However, lower volumes following Thursday’s Thanksgiving holiday in the United States made market movements more volatile.

When we have new mutations on mutations of a spike protein, it almost feels like the initial working assumption for most market participants is that this is a new phase of the pandemic, said Bipan Rai.

Currencies

The yen was one of the leading gainers. It rebounded from five-year lows against the greenback this week. It gained nearly 2% to a high of 113.09, its best day since March 2020.

The euro gained 0.97 percent to $1.1312. However, it fell to more than six-year lows against the resurgent Swiss franc, at 1.0428 francs per euro.

The new virus strain is a textbook flight to quality into the yen and Swiss franc, with thin liquidity also playing a role, hastening the unwinding of short bond positions. The latest CFTC figures show net bearish positioning in the yen and Swiss franc at $1.2 billion and $10.3 billion, respectively.

After reaching a 16-month high of 96.938 on Wednesday, the dollar index fell 0.75 percent to 96.030. It has risen from 93.872 on as investors bet the Federal Reserve will begin raising interest rates in mid-2022 to combat persistently high inflation. According to Rai of CIBC, the greenback’s decline on Friday was more likely due to investors taking profits after the currency’s recent gains rather than changing the dollar’s safe-haven status.

Sterling briefly fell below $1.3278. This was a new 2021 low for the currency, as investors reduced their bets on an interest rate hike in December.

Bitcoin fell to $53,524 in the cryptocurrency market. This was its lowest since October 10. Ethereum fell to $3,917, the lowest since October 28.

• Related: Swiss Financial Market Supervisory Authority