Concerns Over New COVID-19 Variant in South Africa... Safe-Haven Assets Like US Treasuries and Yen Strengthen

Safe-haven assets such as U.S. Treasury bonds and the Japanese yen are strengthening following news of a new COVID-19 variant discovered in South Africa. [Image source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] As a new variant of the COVID-19 virus has been discovered in South Africa and Botswana, safe-haven assets such as U.S. Treasury bonds and the Japanese yen are showing strength. The anxiety that the new variant could become a new variable for the global economy is spreading, reinforcing the preference for safe-haven assets.

According to Bloomberg on the 26th, in the financial markets today, U.S. Treasury bonds, the Japanese yen, and the Swiss franc are showing strength, while stock markets are generally weak. With the New York Stock Exchange closed yesterday for Thanksgiving, futures for the New York stock indices are declining, and major Asian stock markets are also showing weakness.

Meanwhile, the yield on the safe-haven U.S. 10-year Treasury bond fell to 1.58%, down 0.05 percentage points compared to the previous trading day in after-hours futures trading. A decline in bond yields indicates a rise in bond prices.

The yen and Swiss franc have strengthened against the dollar by 0.4% and 0.2%, respectively. On the other hand, the South African rand, the origin of the new variant, fell to its lowest value in a year. The rand dropped as much as 1.3% against the dollar today, with the dollar-rand exchange rate reaching 16.1717 rand per dollar.

It has not yet been confirmed whether the new variant is more contagious or more deadly than existing variants.

However, countries such as the United Kingdom and Israel are taking swift action to prevent the spread of the new variant. The UK and Israel have decided to temporarily suspend flights from South Africa and its neighboring countries Namibia, Botswana, Zimbabwe, Lesotho, and Eswatini.