At least 42,708 diagnosed cases of coronavirus are reported in China and more than 1,017 people have died there. The World Health Organization warns that if cases spread outside of China, it could get out of control and be “the spark that becomes a bigger fire”.
Worries about the disease helped push safe-havens like gold and the dollar higher against the euro on Monday, Reuters reported. Hubei province, the epicenter out the outbreak, reported 103 deaths on Monday — the most in any single day — after 91 deaths on Sunday. The dollar index reached a four-month high.
The outbreak, now a global health crisis, has seen investors put money into safer bets, including U.S. Treasury bonds.
“There is a cocktail of factors supporting the dollar at the moment,” wrote Win Thin, global head of currency strategy at Brown Brothers Harriman. These include positive sentiment towards the U.S. stock market and expectations that the virus’s impact will be relatively smaller in the U.S.
The virus has threatened China’s economic growth as companies struggled to return to work after an extended Lunar New Year holiday.
Continuing weakness in the euro is helping the dollar, its main rival: when one goes up, the other goes down, CNN reported. European growth has been lagging relative to the U.S. economy.
However, multinational U.S. companies could feel some pain as profits in foreign currencies could shrink given the dollar’s strength. The next earnings season could be bad for some parts of corporate America.
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Tech is especially hard hit by this dynamic, including blue-chip stocks like Apple (AAPL), which blamed the dollar’s strength in 2019 for a drag on its earnings, according to CNN.
In China, cities in the province of Hubei are locked down, becoming virtual ghost towns after Communist Party rulers closed factories and schools and canceled flights. Train stations are closed and roads sealed.
Food prices have risen more than 20 percent in China and food delivery workers have become heroes along with the medical professionals, said Shaun Rein, managing director of China Market Research Group.