By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The safe-haven yen and dollar rose on Friday after President Donald Trump tested positive for COVID-19, rattling investors just a month before November’s U.S. presidential election.

By afternoon trading, markets had calmed down, with the dollar and yen still up but moved in narrow ranges.

Data showing U.S. nonfarm payrolls rising less than expected in September, but with a drop in the unemployment rate, had little impact on currencies, as markets focused on Trump’s health.

Trump, who had played down the threat of the coronavirus pandemic for months, said he and his wife Melania had tested positive for COVID-19 and were going into quarantine, upending the race for the White House.

The news sparked some selling on Wall Street, while U.S. Treasury prices were lower after an initial rally.

The yen made its sharpest gain in more than a month to reach a one-week high of 104.95 against the dollar, then steadied. The greenback was last down 0.2% at 105.365 yen

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Implied volatility gauges for the yen rose to a four-week high of 7.62 vols

over the next month, signaling more choppy trading ahead.
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Mike Schumacher, senior macro strategist at Wells Fargo Securities in New York, said Trump’s COVID diagnosis added a layer of uncertainty to an already volatile election season, but the sharp market reaction from earlier in the global session has faded a bit.

“You can take one view and say that…this could limit the amount of political news over the next month,” said Schumacher. “Trump can’t really campaign and if Biden chooses to do a bit less also, you might get pretty limited news. That could reduce volatility.”

News that a $25 billion U.S. airlines deal was “imminent”, according to House Speaker Nancy Pelosi, also somewhat eased