Yuan Drops as Virus Fears Rise


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The Chinese Yuan tumbled against the USD today after the spread of a pneumonia-like virus in China triggered a sudden bout of risk aversion, disrupting world markets.

Authorities have confirmed the virus to be contagious, passing from person to person, with the number of cases continuing to rise and the fourth death having just been confirmed.

Meanwhile, hundreds of millions of Chinese get ready to travel for the Lunar New Year holiday, increasing risks of the virus spreading further.

News of the virus sent shockwaves across the world’s economies, especially since this isn’t the first coronavirus to occur in China.

In 2002/2003, the Severe Acute Respiratory Syndrome (SARS) spreads vastly, killing nearly 800 people in a global pandemic.

Global stocks took the hit, with Chinese stocks dropping by more than 1%.

Kit Juckes, an analyst at Societe Generale, commented on the situation:

You’ve got a stronger yen, a stronger Swiss franc and risk aversion is setting in across everything.

It would be very surprising if it was a trend-changer in terms of where things go from here, but it is early days.

In currency markets, the yuan was worst hit, slipping almost 0.7% to 6.9126 per dollar, drifting from its six-month highs on Monday.

On Monday, China’s National Health Commission confirmed that two cases of infection in China’s Guangdong province were a result of human-to-human transmission.

The Wuhan Municipal Health Commission also announced that at least 15 medical workers in Wuhan have also been infected with the virus, one of whom is in a critical condition.

It seems the crisis has surged across Asia, as currencies associated with Chinese trade and tourism were also affected. The AUD slipped 0.4% to $0.68445, its lowest in over a month.

As Asian markets traded lower, the USD/JPY pair lost 0.2% to 109.96.

Elsewhere, following the Bank of Japan’s meeting earlier today, the bank kept its short-term interest rate target at minus 0.1%.

The bank, however, presented a brighter view of the economy after raising its growth projections for the first time in a year, while at the same time, cut its inflation forecast.

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