Singapore dollar, South Korean won tumble as coronavirus cases rise

SINGAPORE (BLOOMBERG) – The South Korean won and the Singapore dollar, two of Asia’s most trade-sensitive currencies, are getting dumped as the coronavirus spread worsens in Asia.

Both dropped as much as 1 per cent against the United States dollar on Thursday (Feb 20), with Singapore’s currency falling to its lowest in almost three years. The won declined after the nation said virus cases more than doubled in one day.

“The sudden sharp spike to 82 cases in Korea – contrary to slowing new cases in other parts of the world, including China – is a wake-up call to market complacency,” said Mr Christopher Wong, senior FX strategist at Malayan Banking.

The won, along with Asian peers such as the Singapore dollar, may be some of the “biggest casualties” as the economic fallout continues to worsen.

While the Singapore dollar and the won lead losses, almost every other Asian currency also tumbled given the close linkages among the economies in the region.

Other than the increase in cases in South Korea, Japan also reported two deaths from a quarantined cruise ship. Passengers were allowed to start disembarking from the vessel on Wednesday amid concerns the government has not done enough to prevent the disease from spreading.

The Singapore dollar fell to a low of $1.4083 per US dollar on Thursday morning, before paring the loss to trade 0.5 per cent weaker. The won was down 1 per cent at 1,201.95, a level that had previously led to verbal intervention by policymakers.

A gauge of three-month implied volatility for the Bloomberg-JPMorgan Asian Currency Index gained 12 basis points to 4.36 per cent on Thursday.

“The very real threat of infection due to the geographical location is impacting sentiment on the currencies,” said Mr Nick Twidale, general manager of IC Markets in Sydney. “Both economies will be strongly affected by a slowdown in China; market participants are still surprised at the amount of workers that are not coming into offices in Singapore.”

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