By Tommy Wilkes
LONDON (Reuters) – The dollar rebounded on Tuesday afters huge losses against the yen, the euro and the Swiss franc, as investors turned hopeful that global policymakers would introduce stimulus to cushion the economic impact of the coronavirus outbreak.
The moves helped reverse Monday’s gyrations, although at 104 yen per dollar the Japanese currency was not back above the 105 seen before this week.
The dollar started to rise as U.S. stock futures rose and bond yields gained, after U.S. President Donald Trump said he would hold a news conference on Tuesday about economic measures in response to the virus.
U.S. Treasury Secretary Steve Mnuchin also said the White House would meet with bank executives this week in a sign the U.S. government would roll out measures to cope with the virus.
Analysts said it was too early to call a bottom in the dollar, which plunged on Monday after a price war between Saudi Arabia and Russia triggered the biggest daily rout in oil prices since the 1991 Gulf War.
Against a basket of currencies, the dollar rose 0.2% to 95.613 (). It rallied 1.9% against the yen to 104.28 , considerably higher than Monday’s 101.18 low.
The yen also wobbled against major crosses, such as the euro () and the Australian dollar (), after Bank of Japan officials indicated they were ready to ramp up stimulus if necessary before a policy meeting next week.
“It seems pretty clear that owning the yen still works when bond yields are falling, volatility is spiking and risk appetite is disappearing. So today’s a bad day for the yen as we reverse all those sentiments,” said Kit Juckes, an FX strategist at Societe Generale (PA:).
“However, that opens up the opportunity to get yen longs on before we exit the eye of the storm and feel its fury again.”
The euro dropped 0.4% versus the dollar to $ 1.1385 ().
The dollar rose 1.2% to 0.9361 Swiss franc on Tuesday, then fell to 0.9299 francs after three days of heavy selling pushed it to its lowest in almost five years. Data suggest the Swiss National Bank is now intervening to weaken its currency.
Against the pound , the U.S. currency rose 0.5% to $ 1.3067.
Commodity-linked currencies that tumbled on Monday following the crash in oil prices recovered from record lows. The Norwegian crown added 1.6% versus the euro to 10.796 (), still off the 10.4 levels seen last week.
The Canadian dollar rose 0.3% to C$ 1.3658 .
The Russian rouble gained 3.6% and the Mexican peso 0.5%.
Volatility surged in FX markets in recent days, but analysts said it could get much worse depending on upcoming economic data.
“The data from China is likely to be of particular interest as it was the first country to be hit by the virus. The tension on the markets is likely to continue and I would not exclude that the FX markets might be hit be a proper risk-off wave at some point soon,” said Commerzbank (DE:) analyst Thu Lan Nguyen.
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