The US dollar is higher against the Canadian dollar on Tuesday morning. Investors sought havens in the Forex market including the dollar and yen while elsewhere buying gold and selling shares as concerns grew over a coronavirus outbreak in China. The equity sell-off was greatest on the Hang Seng index after Moody’s downgraded the credit rating of Hong Kong because of the ongoing protests.
USD/CAD was higher by 26 pips (+0.2%) to 1.3073 with a daily range of 1.304 to 1.308 as of 9.30am GMT with the currency pair remaining at the top of its 5-day price range but still below near-term resistance at 1.31.
The dollar saw haven flows bid the currency up against the Canadian dollar after it was reported four people have died from a virus in China that can spread person-to-person. As the word-reserve currency, the dollar tends to perform well in periods of uncertainty as American investors exchange foreign investments back into dollars.
The outbreak started in the Chinese city of Wuhan and travellers can now expect extra screening before flights from the city as a precaution against the spread of the disease outside of China. Cases of the disease have already been reported in other Asian counties in including Thailand. Authorities believe and the virus is contained and if that is the case, haven flows could quickly reverse. However if the coronavirus becomes another situation as bad as SARS, the demand for havens like the dollar could increase.
US investors are returning on Tuesday after a long holiday weekend celebrating Martin Luther King Jr holiday. The US dollar – Canadian dollar exchange rate was relatively unmoved on Monday despite some wild swings in the oil price that can correlate with the Canadian dollar.
The focus will shift later to the first day of the Davos conference in Switzerland, where President Trump will give a speech that normally caries a lot of interest, particularly for attendees and TV viewers interested in the next direction the US might take on trade. Presumably the speech will focus on the successful signing of the US-China phase one trade deal and the resilience of the US economy under Trump’s watch.