Yen and Swiss franc gain as COVID variant dents risk appetite



* Graphic: World FX rates Link

By Karen Brettell

NEW YORK, Nov 26 (Reuters) - News of a coronavirus variant potentially resistant to current vaccines sent investors dashing for the safety of the Japanese yen and the Swiss franc on Friday, while traders also took profits after an extended rally in the U.S. dollar.

The yen and franc gains came at the expense of the growth-sensitive Australian dollar and Norwegian crown though thinner volumes after Thursday's U.S. Thanksgiving holiday made market moves more volatile.

Little is known of the variant first detected in South Africa, but scientists say it has an unusual combination of mutations that could make it able to evade immune responses and be more transmissible.

"It almost feels like the initial working assumption for most market participants is that this is a new phase of the pandemic, new lockdowns and restrictions will maybe be put in place, and it certainly feels like we're going to need a new vaccine as well," said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

One of the main gainers was the yen, which bounced off five-year lows hit this week against the greenback, and jumped more than 1% JPY=D3 to a high of 113.66. The currency was on track for its best day since March 2020.

The euro rose 0.75% to a high of $1.1297 EUR=EBS , though it fell to more than 6-year lows against the resurgent Swiss franc EURCHF=EBS at 1.04335 francs per euro.

"This is a textbook flight to quality into yen and the Swiss franc on the new virus strain with the thin liquidity also a factor which may accelerate the unwinding of short bond positions," Kenneth Broux, a strategist at Societe Generale in London, said.

Speculative accounts had been massively short safe-haven assets, with U.S. CFTC figures showing net bearish positioning at $1.2 billion and $10.3 billion for the yen and Swiss franc respectively in the latest week.

The dollar index =USD dipped 0.56% to 96.218, after reaching a 16-month high of 96.938 on Wednesday. It has jumped from 93.872 on Nov. 9 as investors increased bets that the Federal Reserve will begin raising rates in mid-2022 to thwart stubbornly high inflation.

CIBC’s Rai said Friday's decline in the greenback was more likely due to investors taking profits after the currency’s recent gains, and not a change in dollar’s safe haven status.

"The near-term move is mostly about extended positioning and closing those out, once that becomes a little bit more finely balanced and if we are in a risk-off scenario then I would expect the dollar to continue to outperform," he said.

Sterling GBP=D3 briefly slipped to a new 2021 low below $1.3278 as the jitters prompted some to scale back bets on an interest rate hike in December.

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Currency bid prices at 9:39AM (1439 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

96.2180

96.7760

-0.56%

6.931%

+96.7870

+96.1920 Euro/Dollar

EUR=EBS

$1.1291

$1.1206

+0.75%

-7.60%

+$1.1297

+$1.1206 Dollar/Yen

JPY=D3

113.7700

115.3700

-1.45%

+10.08%

+115.3150 +113.6600 Euro/Yen

EURJPY=

128.45

129.29

-0.65%

+1.21%

+129.3300 +128.0700 Dollar/Swiss

CHF=EBS

0.9254

0.9356

-1.07%

+4.62%

+0.9359

+0.9248 Sterling/Dollar GBP=D3

$1.3336

$1.3318

+0.11%

-2.41%

+$1.3349

+$1.3278 Dollar/Canadian CAD=D3

1.2770

1.2646

+0.99%

+0.29%

+1.2781

+1.2650 Aussie/Dollar

AUD=D3

$0.7148

$0.7186

-0.56%

-7.12%

+$0.7190

+$0.7113 Euro/Swiss

EURCHF=

1.0447

1.0485

-0.36%

-3.33%

+1.0490

+1.0434 Euro/Sterling

EURGBP=

0.8464

0.8411

+0.63%

-5.29%

+0.8476

+0.8413 NZ

NZD=D3

$0.6817

$0.6854

-0.51%

-5.05%

+$0.6856

+$0.6805 Dollar/Dollar

Dollar/Norway

NOK=D3

9.0205

8.9530

+0.72%

+5.01%

+9.1010

+8.9850 Euro/Norway

EURNOK=

10.1870

10.0493

+1.37%

-2.68%

+10.2642

+10.0486 Dollar/Sweden

SEK=

9.0863

9.0851

+0.72%

+10.86%

+9.1830

+9.0661 Euro/Sweden

EURSEK=

10.2593

10.1855

+0.72%

+1.82%

+10.3365

+10.1865



World FX rates Link



Additional reporting by Saikat Chatterjee and Sujata Rao in
London; editing by Barbara Lewis

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