Dollar favoured safe haven as funds flee virus fallout

The dollar was sucking up funds across Asia on Thursday after a steep and sudden slide in the Japanese yen called into question its safe haven status and spooked investors out of local assets.

Everything from the Australian dollar to the Indian rupee were under fire as concerns about the impact of the coronavirus drove money to the US currency.

China reported a drop in new infections on Thursday, but scientists warned the pathogen may spread more easily than previously believed as two elderly passengers from a ship quarantined in Tokyo became the latest to die.

Even another rate cut from China could not steady the skittish mood.

"People are trying to get far away from the economic fallout that we might see from the coronavirus. You want your capital as far away from China as possible," said Chris Weston, Melbourne-based head of research at broker Pepperstone.

"The sentiment continues to be 'buy US assets'," he added. "Some people are saying if you want a safe-haven currency in the portfolio you have US dollars now, over the yen."

The yen's fall from grace began Wednesday when heavy and persistent selling drove the currency down against all its peers, many making the biggest moves seen in months.

A run of dire economic news out of Japan has stirred talk the country is already in recession and that Japanese funds were dumping local assets in favour of US shares and gold.

As a result, the dollar celebrated its largest gain in six month to stand at 111.38 yen on Thursday, smashing a chart barrier around 110.30 that had held firm since last May.

The euro was also taking in the view at 120.21, having climbed 1.5% overnight for its best rise since mid-2017. The single currency had no such luck on the dollar and remained pinned at $1.0798.

The shift to all things American, saw the US dollar climb 0.3% on the Chinese yuan to 7.0215 and the Australian dollar sink to 11-year lows at $0.6630. "The critical thing to understand is the Yen weakness is not so much "Risk on" as it is Japanese asset managers heading for the Tokyo market exit in droves," said Stephen Innes, Asia Pacific Market Strategist at AxiCorp.

"With the USD inflow unyielding, its unclear what could stem this tide other than US administration talking down the dollar."

US President Donald Trump has long protested that the dollar was too strong and unfairly penalising US business.