|07 April, 2020

Pound stays on back foot as PM Johnson enters intensive care

Dollar grinding higher on signs coronavirus flattening

Pound coins are seen in the photo illustration taken in Manchester, Britain September 6, 2017.

Pound coins are seen in the photo illustration taken in Manchester, Britain September 6, 2017.

REUTERS/Phil Noble

TOKYO: The pound edged lower against the dollar and the euro on Tuesday after British Prime Minister Boris Johnson was moved to intensive care after his coronavirus symptoms worsened.

The dollar held onto gains against the euro, the yen, and the Swiss franc as tentative signs that deaths due to the novel coronavirus in hot spots in the United States and Europe were starting to slow supported risk sentiment.

The yen was steady against major currencies after Japanese Prime Minister Shinzo Abe unveiled fiscal stimulus worth almost $1 trillion and agreed to declare a state of emergency for Tokyo and other parts of Japan to slow coronavirus infections.

Many investors are looking for signs of a peak in the coronavirus pandemic, but some analysts warn of volatility given the unpredictable nature of the previously unknown virus.

"The currency market has remained fairly calm, but there will be more downside for sterling if Johnson's condition worsens," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"The yen will not react much to the state of the emergency, because other currencies are focused on signs that the coronavirus curve is starting to flatten out."

The pound traded at $1.2234 on Tuesday in Asia following a 0.3% decline on Monday. Against the euro, sterling slipped by 0.19% to 88.39 pence.

Johnson was admitted to hospital on Sunday night and had been undergoing tests after suffering persistent coronavirus symptoms, including a high temperature, for more than 10 days.

Downing Street had said he was still conscious, though his condition deteriorated in the early evening. 

Britain has no formal succession plan should the prime minister become incapacitated, but Johnson has asked Foreign Secretary Dominic Raab to deputise for him.

The dollar traded at $1.0798 per euro, holding onto six sessions of gains. Against the save-haven Swiss franc, the greenback traded near a two-week high of 0.9796.

Risk sentiment improved after the governors of New York and New Jersey pointed to tentative signs that the coronavirus outbreak in their states was starting to plateau.

The Australian dollar edged up 0.5% against its U.S. counterpart, while the New Zealand dollar rose 0.35% against the greenback as investors felt more comfortable buying currencies sensitive to risk.

The dollar fell 0.22% to 108.99 yen on Tuesday ahead of Japan's declaration of a state of emergency.

On Monday, Japanese Prime Minister Shinzo Abe pledged to roll out an unprecedented economic stimulus, equal to 20% of economic output, as his government vowed to take "all steps" to battle the deepening fallout from the coronavirus. 

(Reporting by Stanley White; Editing by Himani Sarkar) ((stanley.white@tr.com; +81 (0)3 4563 2799; twitter.com/stanleywhite1 ;))

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