FX markets are stormy as fears grow surrounding the new South African covid variant. Flows are up an incredible 111% from Thursday and 79% vs the 5-day average. USDJPY has become the most traded currency pair; as safe-havens attract attention and general risk-off sentiment swells. Gold has expectedly climbed higher, whereas in the crypto world Bitcoin and Ethereum have plummeted 8% and 11% respectively.
USDJPY has tracked down 1.5 big figures as investors flock to JPY. Client flows within the currency pair remain quite balanced though, with asset managers driving a net buying bias for the greenback, and vols have soared from 6.9 to 8.2 in the space of twelve hours. Elsewhere, vols are all significantly higher in London as investors scramble to adjust to the heightened fear within the market. EURUSD has taken off in a similar fashion to previous covid scares, quickly forgetting the recent 1,12 level and now reaching up to 1.13. Despite this, client flows are very neutral but nevertheless vols all across the curve have shot up.
EM currencies have understandably suffered. Key losers on Friday include the ZAR - as USDZAR tracks 4 big figures higher following variant scares and South Africa's re-admittance to the UK's red list - and the TWD as concerns over an exacerbated chip shortage resurface. RUB initially took a hit as oil prices plummeted, but news from Russia denied the possibility of a military solution in Ukraine and subsequently calmed the selloff. Nevertheless, there has still been a net USDRUB buying bias driven by asset managers and macro names.
Gold has re-entered the 1800s as a risk-off sentiment encourages a buying of safe-haven assets. Client flows are very neutral altogether - with buying from asset managers balancing out the selling from bank and macro names.
Via UBS
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