The US dollar is higher against the Hungarian forint on Tuesday morning amid a so-called ‘flight to quality’ across forex markets due to the coronavirus outbreak in Wuhan China. The first instance of the virus being contracted in Germany following cases in France reported yesterday, is increasing the  direct risk to European countries, including Hungary.

USD/HUF was higher by 36 pips (+0.12%) to 306.24 with a daily range of 305.35 to 306.27 as of 10am GMT. There was a fleeting move lower to test 305.5 in early trading Tuesday, but fortunes changed and the currency pair went on to break back above 306 toward multi-month highs.

The forint

While the United States has had four reported cases of the coronavirus so far, the dollar is being used as a haven while investors sell currencies perceived to be riskier like the Hungarian forint. A generally risk off tone in FX markets has seen emerging market (EM) currencies tumble to fresh 2020 lows this week and last. The Chinese yuan, as well as the Australian dollar have seen the biggest declines since the onset of the coronavirus because they are being used as proxies for the potential economic damage to the various economies inside Asia. The Japanese yen, the Swiss franc but also the US dollar have all been attracting haven flows.

The dollar

Risker currencies, including the forint stand a chance of recovering some of the recent losses once there are signs that the coronavirus infection rate is slowing. However, recent reports regarding the poor quality of healthcare being received by potential victims of the coronavirus in Wuhan has people alarmed. Locals interviewed by Reuters have commented on the unavailability of testing kits and inadequate quarantine conditions.

It has been several days without major economic datapoints from the US but it is a little busier on Tuesday and that could detract slightly from the coronavirus outbreak. The data highlights are US home price data, durable goods orders in December and the latest consumer confidence figures. All this economic data will be factored in to what might happen at tomorrow’s meeting of the US Federal Reserve.


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