Dollar holds gains, oil currencies fall after Trump positive COVID test

[October 02, 2020]  By Iain Withers

LONDON (Reuters) - The U.S. dollar and the safe-haven Japanese yen clung to their earlier gains on Friday after U.S. President Donald Trump's positive test for COVID-19 spooked investors, just a month before November's presidential election.

Trump said on Twitter he and his wife Melania had tested positive for COVID-19 and would begin quarantine and recovery immediately.

The news sparked a selloff with European stocks falling before paring some of their losses.

The yen made its sharpest gain in more than a month to reach a one-week high of 104.95 and was last up 0.4% on the day. <JPY=EBS> Implied volatility gauges for the yen over the next month rose, signaling more choppy trading ahead.

Currencies seen as riskier bets fell across the board, with a fall in oil prices also pressuring the commodities-exposed Russian rouble, South African rand and Australian dollar. <RUB=> <ZAR=> <AUD=D3>

"The president of the United States has got a disease which kills people. People are de-risking because of that," said Chris Weston, head of research at Melbourne brokerage Pepperstone.

Analysts at MUFG said Trump's COVID infection added "another layer of uncertainty" to the forthcoming election.

"The COVID infection of President Trump will certainly diminish risk appetite," they added in a note.

Investors had already been on edge on signs that a hoped-for U.S. fiscal stimulus package was stalled in Washington, and were nervously awaiting U.S. jobs data due at 1230 GMT for a read on the economy.

U.S. Dollar and Japan Yen notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White

U.S. hiring likely increased by 850,000 jobs in September, according to a Reuters survey of economists, a slowdown from the previous month.

Against a basket of six major currencies <=USD> the dollar rose 0.1%, but remains down 0.8% for the week - its biggest weekly drop since late August. The euro <EUR=EBS> fell 0.3%.

Sterling gained on news British prime minister Boris Johnson will speak with European Commission President Ursula von der Leyen on Saturday, with traders hoping this may help break an impasse in Brexit talks. <GBP=D3>

The pound was last up 0.2%, after whipsawing throughout the week in choppy trade during a sensitive period for negotiations.

Analysts said the next dollar moves would depend on Trump's health, how far the virus has spread amongst top U.S. officials and politicians and on voters' response.

"As far as we know Trump is not gravely ill. It is possible that by the time we reach New York trading that markets will have calmed down," said Ayako Sero, strategist at Sumitomo Mitsui Trust Bank in Tokyo.

"However, this does damage Trump's ability to campaign and time is running out before the election."

(Reporting by Iain Withers, Additional reporting by Tom Westbrook in SINGAPORE; Editing by Chizu Nomiyama)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.