Black Friday sales included Canadian, Australian, and New Zealand dollars. The traditional post-U.S. Thanksgiving shopping day kicks off the holiday season and many retailers offer large discounts. This year’s version included panicked selling of commodity currencies and safe-haven demand for Japanese yen and Swiss francs.
The currency selloff was sparked by reports of a nasty, highly transmittable COVID-19 variant from South Africa, blew up the Twitter-verse, and roiled global financial markets.
The variant, officially denoted as B.1.1.529 triggered an emergency meeting of the World Health Organization (WHO) today, even though it has only been tracked for the last three days. Already governments have imposed new travel restrictions, including restricting flights from South Africa.
The travel restrictions sent crude oil prices tumbling. West Texas Intermediate (WTI) plunged 6.2%, falling from $78.14 to $72.64 overnight on renewed fears of reduced demand even as China, UK, South Korea, Japan, and the US release oil from Strategic Petroleum Reserves.
The Canadian dollar plunged alongside falling crude prices and is the worst-performing major G-10 currency overnight. USDCAD climbed to $1.2772 from $1.2644 before retreating to $1.2645 in early Toronto trading today.
The variant news sent U.S. Treasury yields into free-fall. The 10-year yield fell to 1.53% from 1.656% yesterday as traders reassessed their Fed rate hike expectation. Interest rate increases that were expected as early as May 2022 were pushed back until September.
The drop in Treasury yields gave the beleaguered EUR/USD some much-needed support. EUR/USD climbed to $1.1294 as European Central Bank and Fed interest rate differentials narrowed. However, gains may be capped as the Eurozone is already suffering from renewed COVID-19 outbreaks, and the Nu variant won’t help.
GBP/USD rallied to $1.3338 from $1.3295 along with the rising EUR/USD, due to U.S. dollar selling on the back of lower Treasury yields. However, fears that the Nu variant will manifest in the U.K., and a plunge in the FTSE 100 index is limiting gains.
The Japanese yen is the best performing G-10 currency overnight, rising 1.2%, as safe-haven demand and the drop in Treasury yields knocked USD/JPY down to 113.66 from 115.36.
AUD/USD and NZD/USD dropped in concert with weaker commodity prices. AUD/USD suffered added pressure as Westpac bank dropped its AUD/USD June 2022 forecast to 0.7000 from 0.7700.
There are no U.S. or Canadian economic reports today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians