The discovery of a new vaccine-resistant COVID-19 variant in Africa has taken the forex market by storm and boosted the Japanese yen.
The champion "safe haven" Japanese Yen strengthened rapidly in trading today (26/November) against various other currencies.
USD/JPY tumbled around 0.7 percent to the 114.50s range, while GBP/JPY tumbled 0.75 percent and EUR/JPY tumbled 0.5 percent.
The US dollar, which is both a safe haven, actually weakened because the US market was closed for Thanksgiving on Thursday, November 25, 2021.
The mass media today are in an uproar about the new findings of the Corona virus variant B.1.1.529 in Botswana, South Africa, and Hong Kong.
Only 10 cases have been tracked linked to the variant nicknamed "Nu", but concerns are mounting.
The reason is, the high number of mutations allows this virus variant to be immune to the existing COVID-19 vaccine.
The news triggered the strengthening of safe-haven currencies, while hitting higher risk currency exchange rates.
The South African Rand slumped about 1.6 percent overnight.
AUD/USD tumbled more than 0.8 percent to the 0.7130s range.
NZD/USD also tumbled almost 0.7 percent to the 0.6800s range.
The Antipodean currency duo is now slumping to a record low since November 2020.
Britain hastily announced travel restrictions on South Africa, Botswana, Namibia, Zimbabwe, Lesotho and Eswatini. However, GBP/USD remains dipped to a new record low since December 2020.
"Concerns about COVID have clearly played a role in increasing demand for safe havens, including the Yen. And since South Africa is the location for this new variant, that's a real reason to avoid the rand," said Shinichiro Kadota, senior FX strategist at Barclays. Tokyo, "If the COVID situation worsens, dollar-yen may weaken further, but otherwise, monetary policy divergence will clearly weigh on the yen in the medium term."
Kadota thinks the 114 level should be the lower limit for the USD/JPY currency pair in the short term, unless "the world really does turn for the worse."
BOJ Governor Haruhiko Kuroda last week pledged his commitment to maintaining massive monetary stimulus.
He even emphasized the central bank's readiness to increase the stimulus if needed.
The BoJ's policy direction is contrary to the increasingly hawkish attitude of the US Federal Reserve, thus placing the Japanese yen in a weaker position than the US dollar in terms of bond yields and interest rates.
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