Heavily Mutated Virus Variant Inspires Flight To Safety

Defensive flows have swept across G10 FX space after South African scientists identified a new Covid-19 variant which carries an unusually large number of mutations. The implications of this finding are yet to be determined, but there is concern that the variant could potentially dodge immunity, which would throw sand into the gears of the global fight against the pandemic.

• Participants have flocked into safe haven currencies, seeking shelter from uncertainty surrounding the new virus variant. The yen has comfortably outperformed its G10 peers, while CHF has been the runner-up.
• Risk-sensitive currencies have been dumped, with the Antipodeans landing at the bottom of the G10 pile. AUD/USD has breached support from Sep 29 low of $0.7170 and posted a fresh three-month low.
• Developments in EM FX space have drawn some attention, as USD/ZAR punched through ZAR16 for the first time in a year amid speculation that the new variant could drive another deadly wave of infections in South Africa. Separately, USD/MXN rose to a one-year high after Pres Obrador tapped little-known Finance Ministry off'l to become new Banxico chief.
• The data economic docket is rather thin today, while central bank speaker slate features ECB's Lagarde, de Guindos, Lane, Visco, Schnabel, Centeno & Panetta, BoE's Pill & Riksbank's Ohlsson.