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(LEAD) Trump diagnosis to strengthen dollar, but high market volatility not likely: experts

Finance 13:50 October 03, 2020

(ATTN: UPDATES with more details in paras 11-12)

SEOUL, Oct. 3 (Yonhap) -- U.S. President Donald Trump's infection with the new coronavirus is expected to strengthen the dollar due to investors' chasing after safe assets, but financial markets are not likely to undergo high volatility, market experts here said Saturday.

Trump and first lady Melania Trump tested positive for COVID-19 on Friday, sending Wall Street's main stock indexes lower. The dollar index, a gauge of the greenback's value against a basket of six foreign currencies, rose 0.14 percent.

Analysts said Trump testing positive is expected to raise uncertainty in financial markets, prompting investors to snap up the dollar. But global markets are not likely to post a sharp rise or decline only on the Trump news in light of hopes for new U.S. stimulus measures, they said.

This photo, provided by AFP on Sept. 29, 2020, shows U.S. President Donald Trump and first lady Melania Trump. (PHOTO NOT FOR SALE) (Yonhap)

"The FX market is expected to be affected by Trump's symptoms, but there is a slim possibility for the market seeing high volatility with the single issue," a currency analyst said.

South Korea's foreign exchange authorities are also closely monitoring the global financial markets to gauge the impact of Trump's infection.

"As talks for a fresh U.S. stimulus package are gaining traction, it may offset investor sentiment for safe assets," an official at the Bank of Korea said.

"The financial market is not likely to see a herd behavior nor undergo sharp volatility, but we will closely monitor the market," the official added.

South Korea's financial markets closed for the third straight day Friday due to the Chuseok fall harvest holiday.

The country's main stock index rose 0.86 percent to end at 2,327.89 on Tuesday, and the Korean currency closed at 1,169.5 won per dollar, up 4.1 won from the previous session's close.

Analysts said Trump's diagnosis is expected to have a limited impact on the South Korean stock market, but there is a need to be cautious about political and economic uncertainty that could be raised by his illness.

"Rather than Trump's infection itself, spillover factors could have an impact on the stock market. Concerns are growing that negotiations for additional stimulus may be delayed due to his infection," Kiwoom Securities Co. analyst Suh Sang-young said.

Global investment bank Citi Bank said the Trump news is not likely to cause forced selling of risky assets, given that uncertainty from the U.S. presidential election has been factored in the market to some degree.

Electronic signboards at the trading room of Hana Bank in Seoul show the benchmark Korea Composite Stock Price Index (KOSPI) closed at 2,327.89 on Sept. 29, 2020, up 19.81 points or 0.86 percent from the previous session's close. (Yonhap)

sooyeon@yna.co.kr
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