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  • Asian stocks drop following sharp losses on Wall Street
  • Growth concerns and fears of second wave of virus outbreak weigh over risk assets. 
  • The anti-risk Japanese yen gains ground across the board.

Australian stocks, along with other Asian markets, are tracking Wall Street lower on Friday. 

At press time, Australia’s benchmark equity index ASX 200 is down nearly 2% and stocks in Japan, Hong Kong, and South Korea are reporting 1-2% losses. Meanwhile, Chinese equities are down 0.70%. The S&P 500 fell by 188 points or 5.89% on Thursday, as investors sold risk on renewed concerns of growth. 

Federal Reserve said on Wednesday that the economic recovery would take years and interest rates would remain at record lows through 2022. The central bank’s take on the economy and borrowing costs dashed hopes of faster economic recovery triggered by last Friday’s upbeat jobs report. 

Essentially, equities are now pricing out prospects of V-shaped recovery. Also, concerns that a resurgence of coronavirus infections could stunt the pace of reopening economies seem to be weighing over the global stock markets. Coronavirus cases have jumped in several US states in recent days, raising concerns about the second wave of the virus outbreak. 

While global equities are flashing red, the US dollar is gaining strength against the growth-linked currencies like the Aussie dollar and against emerging market currencies. Meanwhile, the Japanese yen is gaining ground against the US dollar. Put simply, JPY crosses are feeling the pull of gravity.

The action in the FX markets suggests the panic hasn’t set in yet. However, if the latest downturn translates into a full-blown March-like crash, the US dollar will likely gain ground against yen. The greenback surged across the board during the crash seen three months ago. 

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