FOREX-Aussie jumps higher on China virus drug reports; dollar firm

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, Feb 5 (Reuters) - The Australian dollar hopped half
a percent higher on Wednesday and the Norwegian crown advanced,
as reports of medical breakthroughs in the fight against the new
coronavirus boosted growth-linked currencies.
Media reported that a Chinese university had found a drug to
treat people with the virus, while researchers in Britain had
made a "significant breakthrough" in finding a vaccine.
While the Chinese report was a day old and the British
report indicated the research trials were in early stages,
traders used the headlines to load up on risky assets.
"The fact that the risk assets are so supported today may
indicate that investors are hungry for risk," said Valentin
Marinov, the London-based head of G10 FX Strategy at Credit
Agricole.
Against the greenback, the Aussie rose 0.5% at $0.6770 with
some hawkish comments from the central bank governor in Asian
trading also boosting sentiment. The Australian currency is
considered as a barometer of risk appetite towards China given
its close economic ties with Beijing.
Appetite for risk also spread to other currencies including
the Norwegian crown NOK=D3 and its Swedish counterpart
SEK=D3 with both currencies rising 0.3% against the dollar.
A climb in Brent oil prices LCOc1 above the $55 per barrel
line also supported gains.
Gains for riskier currencies translated into weakness for
currencies perceived as safe-havens such as the Japanese yen
JPY=EBS and the Swiss franc CHF=EBS with both of them
weakening against the dollar.
China's Changjiang Daily, the official newspaper of the city
of Wuhan where the virus outbreak began, reported on Tuesday
that a team of researchers led by Zhejiang University professor
Li Lanjuan have found that drugs Abidol and Darunavir can
inhibit the virus in vitro cell experiments.
Robin Shattock, head of mucosal infection and immunity at
Imperial College London, said he was now at the stage to start
testing the vaccine on animals as early as next week with human
studies in the summer if enough funding is secured, Sky news
said. The dollar also benefited from a rebound in risk appetite
with the greenback advancing 0.1% to 98.04, advancing for a
third consecutive day, and within striking distance of a
two-month high of 98.19 hit last week.
"FX markets are slightly optimistic as the infection rate
from the deadly China virus seems to have slowed somewhat but
still remains high at double digit rates," said Thu Lan Nguyen,
a FX strategist at Commerzbank based in Frankfurt.
Though the dollar has veered between acting as a classic
safe-haven asset during times of trade-war tensions and
benefitting from its status as a high-yielding currency in the
developed market space in 2019, the opening days of 2020 have
seen the greenback's correlation with risky assets strengthening
considerably.
As a result, the dollar weakened last week as news of the
spreading China virus hit risk sentiment globally, with only
stocks and risky assets gaining this week as China's response to
the coronavirus outbreak raised hopes it could be contained,
even as the death toll rose sharply.
With more than 99% of confirmed cases confined to China,
drastic quarantine measures in place and the central bank
pouring trillions of yuan into the financial system, investors
have partially unwound their recent flight to safety.
The Chinese currency in the offshore market rebounded
smartly 0.2% against the dollar CNH=D3 , rising past the 6.98
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Australian dollar https://tmsnrt.rs/2trCVPs
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