Safe-haven currencies to retain its appeal into the last quarter – Rabobank

On a one-month view the safe havens JPY, USD and CHF were the best performing G10 currencies before the news emerged about the knock to President Trump’s health. Given that the uncertainties surrounding next month’s US election have just ratcheted up a few notches, the prospects that safe-haven currencies included the USD will find solid support this quarter have strengthened, per Rabobank.

Key quotes

“News of the President’s positive test result has opened up a new set of uncertainties. If the President suffers significantly from virus, renewed caution about the virulence of the virus could weigh on consumer demand. This would further highlight the need for an increased fiscal response from Washington. Alternatively, if the President’s health stays relatively good, relief may lend some support to consumer confidence levels and potentially to his standing at the election.”

“Polls are showing that this is an election in which the US electorate have become particularly engaged and even mainstream press have been reporting on the risk of civil unrest if neither side concedes defeat. This backdrop supported the move into safe-haven currencies in September and it is likely that this move will have further to run.”

“Although the actions taken by the Federal Reserve since March to provide liquidity suggest that the USD is unlikely to be subjected to the sharp movements witnessed in March, we see scope for short-covering in the USD against a wide basket of currencies on a three-month view. We expect USD/JPY to hold around 105 on a one-to-three month view given the JPY safe-haven appeal.”