By Karen Brettell

NEW YORK (Reuters) – Sterling dropped against the dollar and the euro on Monday after it was reported that British Prime Minister Boris Johnson has been moved into intensive care after his COVID-19 worsened.

“Over the course of this afternoon, the condition of the Prime Minister has worsened and, on the advice of his medical team, he has been moved to the Intensive Care Unit at the hospital,” Downing Street said.

Sterling dropped against the greenback to $1.225, from around $1.230 before the report. The euro gained to 0.881 pence against to pound, from 0.877 pence before the news.

“If he is impaired from resuming his official duties, then it creates some complications but we have to wait and watch,” said Ilan Solot, an FX strategist at Brown Brothers Harriman.

British Foreign Minister Dominic Raab is designated to take over leadership of the country if Johnson is unable to fulfil his role.

“It is unclear what the emergency succession plan would be for the prime minister. Markets hate uncertainty and this does not bode well for further steps in battling COVID-19 and for future Brexit trade negotiations,” said Edward Moya, senior market analyst at OANDA in New York.

The drop in sterling came as the market more broadly reflected stronger risk appetite on optimism that the spread of the novel coronavirus in the United States and Europe could be tapering.

The governors of New York and New Jersey said on Monday their states were showing tentative signs of a “flattening” of the coronavirus outbreak, but they warned against complacency as the nationwide death toll topped 10,000 and the number of cases reached 350,000.

European nations including hard-hit Italy and Spain have started looking ahead to easing coronavirus lockdowns after steady falls in fatality rates.

“Today’s currency moves are following the risk-on playbook closely,” analysts at Wells Fargo led by Erik Nelson said in a report on Monday.

The Australian dollar <AUD=> jumped 1.55% to $0.6088.

The dollar gained 0.64% against the Japanese currency <JPY=> to 109.14 yen.

Japan is to impose a state of emergency in Tokyo and six other prefectures as early as Tuesday to contain the coronavirus, while the government prepares a $990 billion stimulus package to soften the economic blow.

But, “we think today’s JPY weakness has more to do with the strength in global equities than reports of a possible state of emergency declaration in Tokyo,” Wells Fargo said.

The euro dipped before euro zone finance ministers are expected to converge on Tuesday on three quick options to support the economy during the epidemic.

Officials have until April 9 to design a package that satisfies members with completely opposing views: those calling for joint debt issuance and those fiercely against it.

The single currency <EUR=> was last down 0.11% against the dollar at $1.0796.

(Additional reporting by Saikat Chatterjee and Dhara Ranasinghe in London; Editing by David Gregorio and Marguerita Choy)