Coronavirus spread could be a positive for the US dollar

The coronavirus is rampant and the variant is spreading at an alarming rate, now being reported in Latin American nations also, such as Mexico.

Surely this is a consideration for EM-FX while the greenback continues to correct on the back of US yields and, now, Federal Reserve officials are fanning the talk of tapering.

Meanwhile, the pandemic’s toll in the United States is drawing attention.

The nation’s seven-day average of coronavirus-related deaths has broken past 3,000 a day, reaching 3,249 on Sunday.

The cumulative total of virus deaths surpassed 375,000 on Monday, according to a New York Times (NYT) database.

California alone reported more than 3,300 virus deaths in the week ended Sunday. No state except New York has recorded more than that in a single week.

On the more encouraging side of things, as of Monday, nearly nine million people had received at least one dose of a Covid-19 vaccine, far short of the federal goal of 20 million people or more by Dec. 31, the NYT reported.

''The federal government said Friday that it had delivered more than 22.1 million vaccine doses to states, territories and federal agencies. The same day, President-elect Joseph R. Biden Jr. said he would release nearly all available doses of the vaccine to states as soon as he is inaugurated.''

As for the United Kingdom, according to a top official, where the new variant was bourne, it is entering its most challenging weeks since the start of the COVID-19 pandemic.

Hospitals face being overrun and morgues are filling up.

"We're now at the worst point of this epidemic for the UK. In the future we will have the vaccine, but the numbers at the moment are higher than they were in the previous peak — by some distance," England's chief medical officer Chris Whitty told the BBC, adding that he expects the next few weeks to be the "most dangerous time."

Meanwhile, the UK has been ahead of the curve on approving COVID-19 vaccinations.

The government is expected to outline how it will hit its target of vaccinating 13 million people by February 15.

However, on the vaccine front, the percentage of surveyed citizens, according to Politico, who would want to get a vaccine if it were available continued to drop.

''In France, only 40%of respondents in the December round of the survey say they would take the vaccine, compared with 54% two months earlier,'' the article wrote. 

Earlier today, Federal Reserve Kaplan said that the biggest risk to the US economy would be something that impedes dissemination of vaccine.

Indeed, a theme that markets are watching intensely for widespread compliance. 

Another new variant

In Asia, a new variant of the virus behind COVID-19 was been detected in Japan this week, the country's Health Ministry announced on Sunday.

It was found in four people and while there are similarities to strains first reported in the UK and South Africa, this particular type does not appear to have been spotted before.

This brings to 34 the number of confirmed infections from a variant strain in Japan.

Market implications

The worst of the surge could still be ahead of us.

The new year started with the global population emerging from the first holiday period in which the new, more transmissible variant of the virus, first found in Britain, was known to be also circulating.

“Things are bad enough as they are right now,” Dr. Fauci said, “but they could get worse in the next couple of weeks.”

In such a scenario, this could all point to a combination of strict lockdowns, like seen in the UK, around the world.

Such a scenario would be optimal for tech/online stocks again and perhaps even drive in a safe-haven bid for the US dollar which is already in the throes of a meaningful upside correction.

DXY monthly chart